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Canada Monetary Policy July 2025

Canada: Bank of Canada keeps rates steady in July

Latest bank decision: At its meeting on 30 July, the Bank of Canada kept its target for the overnight rate at 2.75%, following 225 basis points of rate cuts from mid-2024 to March 2025.

External uncertainty underpins hold: The decision to keep monetary policy on hold was driven by a desire the assess the impact of past rate cuts, in a context of extremely elevated uncertainty surrounding the GDP and inflation outlooks due to the trade conflict with the U.S. Moreover, the Bank commented that the Canadian economy was so far proving resilient despite tariff uncertainty, and that underlying inflation pressures remain, providing further motivation to keep rates unchanged.

Rate cuts likely to resume: The Bank suggested that monetary easing could be necessary if a weakening economy puts downward pressure on inflation. Most panelists see more monetary easing this year, of between 25 and 75 basis points, though several panelists expect rates to remain unchanged through end-2025.

Panelist insight: On the outlook, TD Economics’ Andrew Hencic said:

“Inflation will remain contained over the coming months, and the key will be the scale of any bounce-back in Q3 and Q4 growth. The resulting build-up in excess supply means there’s still scope to reduce the overnight rate in the coming months. However, the BoC is unlikely to push below the bottom end of their neutral range (2.25%).”

Desjardins’ LJ Valencia said:

“Canadian policy makers are hesitant to cut rates considering lingering concerns about the effects of tariffs on consumer prices and the resilience in the economy. Reading between the lines, it does look like the Bank of Canada is teeing up a return to monetary easing later this year. We continue to see the Bank of Canada cutting rates three times this year, with the first 25 basis point cut coming at the next Bank of Canada fixed announcement date in September.”

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