Rental Market Update

Bank of Canada Holds Rates at 2.75% Amid Mounting Trade Uncertainty

The central bank paused its seven-month easing cycle, maintaining its key policy rate at ​2.75% as escalating U.S. tariff threats cloud Canada’s economic outlook. With Governor Tiff Macklem acknowledging “unprecedented uncertainty,” the bank abandoned traditional forecasting in favor of two stark scenarios:

1. ​Baseline Stability: Gradual inflation normalization alongside steady growth.

2. ​Crisis Scenario: A ​severe recession paired with ​resurgent inflation—a worst-case “stagflation” outcome tied to aggressive U.S. trade actions.

​

Decision Context

• ​Rate Path: Pause follows ​seven consecutive cuts beginning June 2024.

• ​Catalyst for Caution: Volatile U.S. tariff policy—including unclear timing, scope, and severity—has paralyzed forward guidance.

• ​Governor’s Stance: “The landscape has shifted dramatically since March,” Macklem stated, stressing the need for “measured analysis until tariff impacts crystallize.”

Key Implications

• ​Policy Flexibility: Holding rates creates room to react to tariff shocks—whether via cuts (if recession deepens) or hikes (if inflation spikes).

• ​Business Sentiment: Prolonged uncertainty may freeze investment and hiring until trade terms clarify.

• ​Household Impact: Mortgage rates stabilize temporarily, but risk of renewed volatility looms.