Bank of Canada Holds Off on Further Rate Cuts Amid Trade Uncertainty
The Bank of Canada appears increasingly hesitant to cut interest rates further, citing growing concerns over a potential trade war with the U.S. According to the minutes from its March 12 meeting, the Bank’s previous rate cut was largely a response to rising uncertainty in global markets.
Canada’s economy ended 2024 on a strong note, with a 2.6% growth rate and inflation close to the 2% target. However, early 2025 has seen a weaker outlook as consumers and businesses scale back spending due to tariff fears.
Inflation and Trade Pressures Impact Decisions on Further Rate Cuts
A BMO economist noted that the Bank is becoming more cautious about inflation risks tied to trade disruptions, a weaker Canadian dollar, and rising costs for businesses. February’s inflation data showed a sharp rise, reinforcing the Bank of Canada’s concern that higher prices could become persistent.
A Oxford Economics economist added that while further rate cuts are possible, the Bank is unlikely to lower its policy rate below 2.25%, the lower end of its neutral range 2.25%-3.25%.
Major Takeaways from the Bank of Canada’s Meeting
- U.S. Slowdown and Trade Risks: Weakening U.S. growth and trade policy uncertainty have increased caution among businesses and households.
- Rising Business Costs: A weaker Canadian dollar and trade tariffs are pushing up costs for imported goods and supply chains.
- Inflation Expectations Increasing: Short-term inflation expectations have risen due to public awareness of potential price increases.
- No Further Guidance: The Bank is avoiding predictions due to ongoing economic risks.
How This Affects Mortgage Borrowers
For Homeowners and homebuyers, this uncertainty regarding rate cuts could influence mortgage decisions. With rate cuts on pause, mortgage borrowers should assess all of their options before making decisions. Steve and Nathan at Client First Mortgage Solutions are here to answer all of your mortgage questions. Their expert guidance ensures you get the best mortgage advice navigating these market shifts. Contact Client First Mortgage Solutions today!
Original Article – Canadian Mortgage Trends – Steve Huebl – March 26, 2025
