Bank of Canada maintains 2.75% rate as trade worries persist

July 30, 2025

RED FM News Desk

The Bank of Canada today announced it would maintain its key interest rate at 2.75%, a level it has held since March. The decision, widely anticipated by major Canadian banks, comes amidst persistent uncertainty surrounding trade relations with the United States.

In its latest monetary policy report released on Wednesday, the central bank stated that “with uncertainty about U.S. trade policy still elevated, the outlook for the Canadian economy remains clouded.” This marks the third consecutive time the Bank of Canada has kept the rate steady, with inflation remaining near the bank’s 2% target.

Canada is currently facing a Friday deadline set by U.S. President Donald Trump to finalize a new trade agreement. Failure to reach a deal could expose Canada to a potential 35% tariff on goods not conforming to the Canada-United States-Mexico Agreement (CUSMA), along with threats of new regional tariffs.

Without explicitly naming President Trump, the central bank acknowledged that “some clarity has been offered” regarding the global trade conflict, noting recent new trade agreements between the U.S. and other nations. However, for Canada, trade uncertainty persists on multiple levels, now further complicated by the likelihood of some level of tariffs remaining in place beyond August 1.

Governor Macklem Addresses Rate Decision and Economic Outlook
Bank of Canada Governor Tiff Macklem stated that the Governing Council reached a clear consensus on its decision to maintain the key interest rate at 2.75%.

Macklem noted that Canada’s economy has not yet deteriorated rapidly despite U.S. tariffs, while inflation has remained somewhat stubborn amidst trade uncertainty. The Bank of Canada typically lowers its policy rate to stimulate the economy but keeps borrowing costs higher when concerned about rising inflation.

Macklem indicated that a rate cut might be necessary if a weaker economy puts more downward pressure on inflation, especially if upward price pressures from trade barriers are contained.