Bank of Canada Holds Interest Rate at 2.75% as Trade Tensions Grow

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The Bank of Canada located in Ottawa (Photo by Taxiarchos228, CC BY-SA 3.0)

The Bank of Canada is keeping its key interest rate at 2.75% for the second month in a row. They are being cautious because economic uncertainty is on the rise. This decision comes just days after U.S. President Donald Trump raised tariffs on Canadian steel and aluminum to 50%, raising new worries about a possible trade war.

Bank Governor Tiff Macklem said there is “unusual uncertainty” in the economy right now. He also noted that inflation is becoming harder to predict, adding pressure to an already difficult decision.

In March, the central bank lowered the rate by 25 basis points to help support the economy. It held the rate steady in April, aiming to slow inflation without hurting growth. However, with U.S. tariffs now threatening major Canadian industries, some expected the bank might cut rates again to mitigate the impact.

Instead, the bank chose to stay the course. Macklem is walking a fine line—trying to keep inflation under control while avoiding a downturn caused by trade troubles with the U.S.

Rising costs from tariffs could push prices higher for Canadian consumers, but cutting rates too soon might make inflation worse. Holding the rate gives the bank more time to watch how things unfold.

Experts say the next move will depend on how inflation and trade conditions develop. For now, Canada’s central bank is choosing stability in a time of growing uncertainty.