Bank Of Canada Leaves Interest Rates Unchanged Amid Tariff Uncertainty

(RTTNews) - Following a series of interest rate cuts over the past several months, the Bank of Canada on Wednesday announced its widely expected decision to leave interest rates unchanged.

The Bank of Canada said it decided to maintain its target for the overnight rate at 2.75 percent, with the Bank Rate at 3 percent and the deposit rate at 2.70 percent.

The accompanying statement noted increased uncertainty due to the major shift in direction of U.S. trade policy and the unpredictability of tariffs makes it unusually challenging to project GDP growth and inflation in Canada and globally.

The Bank of Canada said its April Monetary Policy Report subsequently presents two scenarios that explore different paths for U.S. trade policy.

"In the first scenario, uncertainty is high but tariffs are limited in scope. Canadian growth weakens temporarily and inflation remains around the 2% target," the Bank of Canada said.

"In the second scenario, a protracted trade war causes Canada's economy to fall into recession this year and inflation rises temporarily above 3% next year," the Canadian central bank added, noting, "Many other trade policy scenarios are possible."

The Bank of Canada said its Governing Council will proceed carefully, with particular attention to the risks and uncertainties facing the Canadian economy.

The risks and uncertainties include the "extent to which higher tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve," the bank said.

The Bank of Canada concluded its statement by noting, "Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians."