The Economic Brief – What to make of the Bank of Canada interest rate hold announcement?

Andrew Grantham: The Bank of Canada decided today to keep its interest rate on hold at 2.75%, rather than delivering a further interest rate cut in what was a very, very close decision. The reason for the hold was really just the uncertainty around tariffs, and the Bank of Canada wants to get more clarity on that before deciding what to do in terms of interest rates. Uncertainty was actually so great that the Bank of Canada decided to offer two possible economic forecasts, rather than just their one. And they told us that they will be reacting to economic data rather than relying too heavily on those forecasts. Unfortunately, in terms of reacting to the economic data, we do think that data will worsen over the months ahead. We will see a contraction of the economy in Q2, and a slight rise in the unemployment rate that will justify an interest rate cut in June. This is a cut delayed, not a cut that won’t be given at all to the Canadian economy.