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Canada: Policy Rate Held At 2.75% (Consensus 2.75%) in Jun-25

• The Bank of Canada held its policy rate at 2.75%, as expected, but disappointed market participants who anticipated a dovish signal or rate cut, reflecting a cautious, data-dependent stance.
• Firmer-than-expected core inflation and persistent tariff-related cost pressures have offset the disinflationary effects of a softening domestic economy, prompting the Bank to be vague and non-committal about the potential for further rate cuts.
• The interest rate outlook remains highly uncertain, with future policy decisions hinging on the evolution of inflation, domestic demand, and the unpredictable trajectory of US trade policy.

Canada: Policy Rate Held At 2.75% (Consensus 2.75%) in Apr-25

• The Bank of Canada held its policy rate at 2.75%, meeting expectations but disappointing those market participants who had positioned for another rate cut amid rising trade tensions and economic uncertainty.
• The decision reflects a careful balance between weakening domestic demand and inflation risks from tariff-related cost increases, with short-term inflation expectations having risen despite moderating core inflation.
• Future policy adjustments will be guided by the evolving trade landscape, the extent of demand erosion and cost pass-through, and the anchoring of inflation expectations, with the Bank highlighting its limited role in mitigating trade-driven shocks.

Canada: 25bp Rate Cut To 2.75% (Consensus 2.75%) in Mar-25

• The Bank of Canada cut the policy rate by 25 basis points to 2.75%, in line with expectations, as heightened US trade tensions introduced downside risks to economic activity despite stronger-than-anticipated GDP growth.
• Inflation remains near the 2% target but is expected to rise to 2.5% in March due to the expiry of temporary tax measures, while concerns over tariffs have lifted short-term inflation expectations.
• The Bank will closely assess the balance between weaker demand and higher cost pressures, maintaining a data-dependent approach to future rate decisions, with inflation expectations and trade policy developments being key determinants.

Oil Update: Pipe Dreams

• With so many conflicting signals emerging from the US Administration, it is not surprising that both investors and extractors are increasingly cautious about politicians’ aspirations for the hydrocarbons market in both the US and Canada. This may be some small consolation for Opec.

By Alastair Newton