The Bank of Canada announced today it is holding its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%, amid ongoing global trade tensions and uneven domestic economic data.

The bank pointed to persistent uncertainty surrounding U.S. trade policy, particularly fluctuating tariffs. “Tariff rates are well above their levels at the beginning of 2025, and new trade actions are still being threatened. Uncertainty remains high,” it stated.

Since April, global growth has remained resilient, but the Bank cautioned this “partly reflects a temporary surge in activity to get ahead of tariffs.” In the U.S., inflation remains above 2%, and in China, the economy is slowing as high tariffs “have begun to curtail Chinese exports to the U.S.”

Canada’s first-quarter GDP grew by 2.2%, slightly above expectations, driven by “the pull-forward of exports to the United States and inventory accumulation.” However, “final domestic demand was roughly flat,” and the labour market showed signs of weakening, with unemployment rising to 6.9%.

CPI inflation eased to 1.7% in April, largely due to the elimination of the federal carbon tax, which reduced inflation by 0.6 percentage points. However, “excluding taxes, inflation rose 2.3% in April, slightly stronger than the Bank had expected.” The Bank added that “many businesses say they intend to pass on the costs of higher tariffs.”

“Governing Council decided to hold the policy rate as we gain more information on U.S. trade policy and its impacts,” the Bank said. “We will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.”

The Bank emphasized its cautious approach during this period of global volatility. “We are focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval,” it stated. “We will support economic growth while ensuring inflation remains well controlled.”