The Bank of Canada held its overnight target rate at 2.75% at its April 2025 decision, choosing to pause after a series of reductions as the Governing Council assessed the evolving economic landscape shaped by uncertainty over United States trade policy. The decision was accompanied by the publication of the quarterly Monetary Policy Report, which laid out the central bank's analytical framework for thinking about two distinct trajectories for the Canadian economy depending on how the US tariff situation develops.
The pause followed reductions from the peak reached during the post-pandemic tightening cycle; at 2.75%, the policy rate sits within or close to the central bank's own estimate of the neutral rate range.
TWO SCENARIOS IN THE MONETARY POLICY REPORT
Rather than producing a single central economic projection, the Bank of Canada chose to set out two scenarios in its April Monetary Policy Report, a format the bank adopted because of the unusually high uncertainty around US trade policy. In the first scenario, uncertainty is high but US tariffs are limited in scope; Canadian growth weakens temporarily while inflation stays close to the 2% target. In the second, a more protracted and broader trade conflict weighs materially on Canadian exports, business investment, and household confidence, tipping Canada into recession in 2025 and pushing inflation temporarily above 3% in 2026.
NEXT STEPS
Variable-rate mortgage holders, corporate borrowers on floating-rate facilities, and consumers with lines of credit will see no immediate change in their debt-servicing costs as a result of the April decision. The Governing Council indicated it would continue to monitor incoming data — particularly on trade developments and their pass-through into domestic activity indicators and inflation — before its next scheduled decision.