As expected, the BoC held rates steady at 2.75%.
Today’s decision was accompanied by an updated Monetary Policy Report (MPR), in which the Bank provided economic forecasts based on three trade scenarios: current tariffs, de-escalation, and escalation.
The noteables.
The BoC appears to be more concerned with the growing slack in the economy than with the recent stickiness in inflation, with rising unemployment becoming a worrisome trend.
As per their press release, ‘If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate’
The bottom line.
The Bank is tilted to cutting rates further and is patiently waiting for clarity on trade negotiations. Softness in core CPI or negative employment numbers will likely lead to at least one more 25 bps cut.
