The Bank of Canada (BoC) has decided to keep its key interest rate at 2.75%, ending a streak of seven straight cuts since last summer.
Why? A lot of economic uncertainty — especially around new U.S. tariffs — is making it hard for the BoC to predict what comes next. Instead of their usual detailed forecast, the bank shared two possible paths:
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Scenario 1 (Best Case): U.S. tariffs are rolled back through negotiations. The economy slows temporarily, then gradually recovers. Inflation could dip to 1.5% before returning to the 2% target.
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Scenario 2 (Worst Case): A global trade war breaks out. Canada could fall into a year-long recession, and inflation may jump to 3.5% by mid-2026.
Right now, growth is expected to be weak this spring. April inflation is projected to dip to 1.5%, partly because of lower oil prices and the removal of the federal carbon tax.
The BoC says it will stay flexible and adjust rates again if needed to keep inflation in check and support the economy.
