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# Bank of Canada holds overnight rate at 2.75% as US tariff uncertainty persists and core inflation firms
- URL: https://www.theglobalbanker.com/bank-of-canada-holds-overnight-rate-at-2-75-as-us-tariff-uncertainty-persists-and-core-inf/
- Published: 2025-06-04T14:00:00.000Z
- Updated: 2026-09-29T11:32:14.000Z
- Description: The Bank of Canada kept its policy rate unchanged on 4 June 2025, citing still-high uncertainty over US trade policy and some unexpected firmness in recent inflation data.
- Author: TGB Editorial Team
- Tags: Central Banks, Americas, #archive

The Bank of Canada held its target for the overnight rate at 2.75% on 4 June 2025, with the Bank Rate at 3% and the deposit rate at 2.70%, saying uncertainty about US tariffs remained high.

The central bank said the US administration had continued to raise and lower various tariffs since its April Monetary Policy Report. China and the United States had stepped back from extremely high tariffs and bilateral trade negotiations had begun with a number of countries, but their outcomes were highly uncertain, tariff rates were well above their levels at the start of 2025 and new trade actions were still being threatened.

#### DOMESTIC ECONOMY

Canadian GDP grew by 2.2% in the first quarter, slightly stronger than the Bank had forecast, as exports pulled forward to the United States and inventory accumulation boosted activity, while final domestic demand was roughly flat. The labour market had weakened, particularly in trade-intensive sectors, and unemployment had risen to 6.9%. The Bank said it expected the economy to be considerably weaker in the second quarter as the strength in exports and inventories reversed.

CPI inflation eased to 1.7% in April as the elimination of the federal consumer carbon tax reduced inflation by 0.6 percentage points. Excluding taxes, inflation rose 2.3%, slightly stronger than the Bank had expected, and its preferred measures of core inflation moved up. Surveys indicated that households continued to expect tariffs to raise prices and that many businesses intended to pass on the costs of higher tariffs.

#### RATIONALE FOR THE HOLD

Governing Council said that, with uncertainty about US tariffs still high, the Canadian economy softer but not sharply weaker, and some unexpected firmness in recent inflation data, it had decided to hold the policy rate while it gained more information on US trade policy and its impacts. It said it would continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures from higher costs.

The Bank set its next scheduled rate announcement for 30 July 2025, alongside its next Monetary Policy Report.