The Bank of Canada held its benchmark interest rate at 2.75% on Wednesday, pausing after seven straight cuts as it assesses the economic fallout from US trade tensions.
Governor Tiff Macklem cited “considerable uncertainty” stemming from shifting US tariffs, which have rattled markets, clouded global growth and fueled inflation concerns.
The central bank outlined two scenarios: a quick resolution with modest economic drag, or a prolonged trade war that triggers a year-long Canadian recession, 12-25% tariffs, and inflation surpassing 3% by 2026.
For now, the bank opted to hold, aiming to balance both outcomes.
Inflation cooled to 2.3% in March, partly due to lower gas prices and falling US travel demand.
Business and consumer confidence have weakened, with some manufacturers already cutting jobs.
The bank signaled a cautious path forward, saying it will monitor tariff impacts on demand, prices and expectations before adjusting rates further.