Moneycorp Market Updates
Bank of Canada Pauses Rate Cuts Amid Trade Policy Uncertainty
2 minute readThe Bank of Canada held its policy rate steady at 2.75%, pausing for the first time in eight meetings. The decision was broadly expected, with a slim majority of economists in Bloomberg’s survey forecasting a hold. The Canadian dollar initially strengthened following the announcement and continues to trade higher, up approximately 0.49%.
In its statement, the Bank emphasized a cautious approach, highlighting the uncertainty surrounding U.S. trade policy and the potential economic fallout from escalating tariffs. Governor Tiff Macklem reinforced that monetary policy cannot resolve trade-related risks nor fully offset the damage from a potential trade war. “We still don't know what tariffs will be imposed, whether they’ll be reduced or escalated, or how long this will last,” he stated.
Policy Deliberations
Governor Macklem elaborated that the Governing Council considered two options: maintaining the current rate or implementing a 25 basis point cut. Ultimately, they chose to hold the rate steady to better assess the evolving situation.
Lastly, the Bank of Canada noted that it is purposely limiting forward guidance at this stage. Officials indicated that they want to maintain flexibility and avoid signaling a premature direction for policy until there is greater clarity on the evolving global trade environment and its economic implications.
