{"id":2025,"date":"2025-07-31T19:52:24","date_gmt":"2025-07-31T19:52:24","guid":{"rendered":"https:\/\/ft365.org\/index.php\/2025\/07\/31\/boc-holds-at-2-75-while-inflation-and-trade-risks-cloud-outlook\/"},"modified":"2025-07-31T19:52:24","modified_gmt":"2025-07-31T19:52:24","slug":"boc-holds-at-2-75-while-inflation-and-trade-risks-cloud-outlook","status":"publish","type":"post","link":"http:\/\/ft365.org\/index.php\/2025\/07\/31\/boc-holds-at-2-75-while-inflation-and-trade-risks-cloud-outlook\/","title":{"rendered":"BOC Holds at 2.75% While Inflation and Trade Risks Cloud Outlook"},"content":{"rendered":"
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As widely expected, the Bank of Canada (BOC) kept interest rates unchanged at 2.75% in July, marking its third consecutive hold as policymakers grapple with persistent U.S. trade uncertainty and mixed domestic economic signals.<\/p>\n

This decision came as Governor Tiff Macklem acknowledged that tariffs are causing permanent economic damage<\/strong>, stating that while growth will resume, \u201cit\u2019ll be on a permanently lower path.\u201d<\/p>\n

Key Points from BOC\u2019s Event:<\/h3>\n
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  • Rate unchanged<\/strong>: Overnight rate held at 2.75%, with Bank Rate at 3% and deposit rate at 2.70%<\/li>\n
  • Trade uncertainty persists<\/strong>: U.S. tariffs \u201cstill too unpredictable\u201d to provide single economic forecast<\/li>\n
  • Economic contraction<\/strong>: Q2 GDP estimated to have contracted 1.5% after Q1\u2019s 2.2% growth driven by export pull-forward<\/li>\n
  • Inflation pressures mixed<\/strong>: Headline CPI at 1.9% but underlying inflation climbed to roughly 2.5%<\/li>\n
  • Dovish tilt<\/strong>: BOC explicitly states rate cuts may be needed if economy weakens further<\/li>\n<\/ul>\n

    Link to the official BOC July monetary policy statement<\/strong><\/p>\n

    In his presser, Macklem revealed there was \u201cclear consensus\u201d to hold rates steady<\/strong>, but acknowledged the Governing Council had \u201cmore diversity of views\u201d<\/strong> regarding future policy direction. He emphasized the BOC must proceed carefully given the \u201cunusual amount of uncertainty,\u201d being less forward-looking than usual, while ready to respond to new information.<\/p>\n

    The BOC head honcho stressed that \u201cwe will support economic growth while ensuring inflation remains well controlled,\u201d warning that the bank won\u2019t let \u201ca tariff problem become an inflation problem.\u201d<\/p>\n

    He noted that some factors causing the recent uptick in underlying inflation should unwind, citing the appreciated Canadian dollar and moderated wage growth.<\/p>\n

    Link to BOC July monetary policy press conference<\/strong><\/p>\n

    For the second consecutive quarter, the BOC abandoned traditional forecasts, instead presenting three scenarios<\/strong> based on tariff outcomes.<\/p>\n