BoC kept its overnight rate unchanged at 2.75% as expected, opting for caution amid lingering uncertainty over US trade policy. While acknowledging a “softer but not sharply weaker” economy, the Governing Council pointed to recent inflation data that showed “unexpected firmness,” warranting a wait-and-see approach before committing to further policy moves.
In its accompanying statement, BoC emphasized that it is carefully weighing both “downward” and “upward” pressures on inflation. A slower economy is expected to restrain price growth, but tariff-related cost increases could do the opposite.
Key concerns for the central bank include the potential drag from reduced US demand for Canadian exports, spillovers into business confidence and employment, and whether cost increases are being passed on to consumers.
