After seven consecutive cuts, the Bank of Canada (BoC) is maintaining the key interest rate at 2.75 per cent, as it takes time to analyze how the U.S. tariffs will impact the national and global economies.
On Wednesday morning, the bank said it’s also lowering the bank rate to three per cent, and deposit rate at 2.70 per cent.
The central bank explained that the tariffs imposed by the U.S. President Donald Trump on several imports from Canada and other foreign countries have made it difficult to predict certain factors, including global and domestic inflation rates and GDP growth.
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According to the BoC, the global economy was growing solidly at the end of last year, but the situation shifted once Trump stepped into office and announced the tariffs, causing uncertainty for consumers and businesses and inflation to rise in the last couple of months.
The latest Monetary Policy Report (MPR) for April indicates that the trade war could lead to various different political and economic scenarios, including one in which limited tariffs slow down Canada’s growth but are resolved quickly, maintaining the inflation rate around two per cent, and another in which the tariffs remain, leading to a recession and inflation rates above three per cent for the next year.
At a press conference on Wednesday, BoC Governor Tiff Macklem said the bank will take time to assess the future of the Canadian economy amid the trade war uncertainty, and will keep supporting economic growth and inflation control.
“Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is ensure that Canadians continue to have confidence in price stability,” he said.
“A lot has happened since our March decision, five weeks ago, but the future is really no clearer. We still do not know what tariffs will be imposed, whether they will be reduced or escalated, and how long all of this will last.”
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Meanwhile, lower gas prices and Prime Minister Mark Carney’s decision to remove the carbon tax will also drive inflation down, but the future of the Canadian economy is still highly reliant on what will happen with the tariffs, as explained by the governor.
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“Looking beyond the near term, what happens to the Canadian economy and inflation depends critically on the U.S. trade policy, which remains highly unpredictable. Given this uncertainty, point forecasts for economic growth and inflation are really of little use for anything.”
HOW WILL THIS ANNOUNCEMENT IMPACT THE HOUSING MARKET?
The uncertainty about how the global market and trade policies will move forward following the U.S. tariffs also keeps the housing market highly unpredictable.
RATESDOTCA mortgage and real estate expert Victor Tran reveals that the tariffs have driven uncertainty among potential buyers, making the housing market even slower than it had been in the past few years.
“The current economic environment does not inspire consumer confidence in large purchases, such as the mortgage on a home. This is especially true for homebuyers that work in industries directly affected by the trade war, such as the automotive industry,” he said in an email statement on Wednesday.
“For those that are concerned about potential job loss, tight finances, or renewing into a higher rate, talk to a mortgage broker about strategies that may help in these circumstances.”
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According to Tran, the BoC interest rate hold will not have a significant impact to change the situation.
“The housing market overall has been sluggish for months, with a spring market that is much more muted than in previous years. This state of the housing market is not likely to change much with this rate hold,” he added.
The real estate expert also predicts that the BoC will make two more interest rate cuts in 2025 in an attempt to revitalize the economy, which could potentially encourage more potential homebuyers to purchase a property.
“We could see some activity in the housing market if there are future rate cuts,” he said. “Though it’s difficult to predict, as purchasing trends will be affected by what’s happening in the broader economy, and we don’t have a clear picture of that yet.”
Meanwhile, licensed mortgage broker and LowestRates.ca expert Leah Zlatkin says although the tariff situation has been causing uncertainty among buyers, housing market trends vary across different Canadian regions, with Toronto and Vancouver remaining cautious, while Edmonton maintains an active market.
“We’re seeing distinct housing market stories across Canada. Edmonton remains the hot spot – prices are climbing, sales are brisk, and bidding wars are possible. By comparison, buyers in Vancouver and Toronto are hesitant due to economic uncertainties, despite more listings and prices stabilizing. Meanwhile, in Calgary, the market is transitioning to a balanced state,” she said in a statement on Wednesday.
According to Zlatkin, the BoC announcement is unlikely to alter the varying trends, while buyers will need to assess where to best buy a house in Canada to ensure they best maintain “long-term financial goals.”
“These patterns will likely continue, with Edmonton resilient, and buyers in Toronto, Vancouver, and Calgary adopting varying degrees of caution,” she said.
