Bank of Canada reveals latest rate decision as tariff turmoil rages on

The Bank of Canada has held interest rates steady for the third time in a row, announcing no change to its overnight rate in July as it keeps a close eye on stubborn inflation and a robust labour market.

The central bank said on Wednesday morning that it was leaving its key interest rate at 2.75%, a decision markets had viewed as a near certainty after inflation ticked upwards last month and the economy added a surprising 83,800 jobs despite ongoing trade turbulence.

The announcement means variable-rate mortgage holders and HELOC (home equity line of credit) borrowers will be waiting a while longer for their rates to fall, with attention now turning to the Bank’s plans for the rest of the year.

Some leading economists still say the central bank will return to rate-cutting mode by the end of 2025, although banking giants Scotiabank and Royal Bank of Canada (RBC) both believe the Bank is done with rate reductions and won’t cut again before the year is up.

While Bank decisionmakers opted to trim rates seven times in 2024 and early 2025, the trade war launched by US president Donald Trump after taking office in January has thrown the Canadian economy into turmoil.

Economists raised fears of tens of thousands of job losses if Trump followed through on threats to impose massive tariffs on Canadian imports crossing into the US.

The president has walked back on some of those levies, although the clock is ticking down to a self-imposed deadline of August 1 for Canada and the US to reach a trade agreement to avert another tariff wave.

Against that backdrop, Bank of Canada governor Tiff Macklem has highlighted the potential for the trade war to weigh against economic growth and the labour market.

Fierce Canadian counter-tariffs against US trade policy could also put upward pressure on inflation, which inched higher to 1.9% in June as core measures increased.

That jump, which arrived shortly after reports of a stronger-than-expected labour market performance, virtually ended any slim chances of the Bank cutting rates in July.

It remains to be seen what impact another hold by the central bank will have on Canada’s housing and mortgage markets.

Rates have fallen since the same time last year – but they’re still well up over the levels seen during the COVID-19 pandemic, and reports suggest plenty of homebuyers are sitting on the sidelines because of stubbornly high borrowing costs.

The Bank of Canada now has just three decisions remaining between now and the end of the year: the next arrives on September 17, with announcements on October 29 and December 10 to follow.

Source: Canadian Mortgage Professional