In this blog:
What Does the Bank of Canada do?
Eight times a year, the Bank of Canada (BOC) announces its benchmark lending rate based on an assessment of the Canadian economy. This rate directly impacts variable interest rate products, such as mortgages, loans, and lines of credit, as banks and lenders adjust their prime rates accordingly. Understanding these changes can help you make informed financial decisions. For more information, take a look at our blog post summarizing four of the most frequently asked questions regarding the BOC.
Below, we break down the latest announcement and what it means for you.
Were there any Changes to the Interest Rate?
Canada’s central bank has opted to hold its key interest rate steady at 2.75 percent today. The bank noted that while some components of US trade measures have solidified in recent weeks, further regulations remain unpredictable.
What Information did the Bank Share about the Economy?
Canadian Economy
- In response to ongoing shifts around trade policy, July’s Monetary Policy Report (MPR) presents three alternate scenarios:
- A current tariff scenario, reflecting all tariffs implemented or formally agreed upon as of July 27, 2025;
- A trade escalation scenario, projecting the potential impact of further trade restrictions; and
- A de-escalation scenario, exploring the effects of easing or removing current tariffs.
- In Canada, the economy has so far shown resilience against the trade disruptions created by US tariffs.
- Following steady momentum in the first quarter of 2025, Canada’s GDP is estimated to have contracted by approximately 1.5 percent in quarter two.
- Under the current tariff scenario, GDP is expected to grow to about 1 percent in quarter three of 2025. Long term, output remains staggered throughout 2026 and picks up to about 2 percent in 2027.
- CPI inflation reached 1.9 percent in June, largely driven by elevated shelter costs. However, shelter price inflation has continued to ease in recent months.
Global Economy
- Although global oil prices have seen some recent volatility, they remain relatively stable and are close to their April 2025 levels.
- The Canadian dollar has gained strength against the US dollar, reflecting shifts in both trade dynamics and investor sentiment.
- The central bank noted continued resilience in the global economy, even amid ongoing uncertainty surrounding US tariffs. Under the current tariff scenario, global growth is projected to slow to approximately 2.5 percent by the end of 2025.
- In the U.S., economic growth softened during the first half of 2025 and inflation edged higher in June as tariffs began to place upward pressure on consumer prices.
How does this Impact Me?
- Borrowing costs for mortgages and other loans will not change due to today’s announcement.
- The bank noted that many Canadian businesses are facing rising costs related to sourcing materials and expanding into new markets. Over time, these pressures could lead to higher consumer prices.
Will there be any Interest Rate Changes in the Near Future?
Governing Council is closely monitoring risks and uncertainties within the Canadian economy. They are paying particular attention to:
- How U.S. tariffs may reduce demand for Canadian exports;
- The impact of trade-related uncertainty on business investment, employment, and household spending;
- How quickly rising costs are passed on to consumers; and
- The evolution of inflation expectations.
While additional rate cuts are still anticipated in 2025, the exact timing remains uncertain.
