The Bank of Canada held its policy interest rate at 2.75% yesterday. If you’re wondering why, it uses the word “uncertainty” no fewer than nine times in its announcement.
Why it matters: Despite little sign of underlying economic strength and very real recession risks, the BoC doesn’t feel it can confidently cut rates amid so much global economic turmoil.
- The BoC laid out two possible scenarios based on different tariff policies, neither of which painted a rosy growth picture, while underscoring that “many other trade policy scenarios are possible.”
Why it’s happening: A U.S. trade policy that changes daily (and sometimes hourly) and the mixed responses of its trading partners are having unpredictable effects on the markets. Accurately forecasting where the economy is headed is much more difficult, forcing the central bank to wait for more data before making any moves.
What’s next: The central bank made it clear that this is a pause to its rate-cutting cycle, not an end, and that its decision was based on a lack of information rather than evidence that the economy is heating up.—TS