Archive

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

Canada: 25bp Rate Cut To 3.0% (Consensus 3.0%) in Jan-25

• The Bank of Canada reduced its policy rate by 25 basis points to 3% and announced the end of quantitative tightening, aligning with expectations, as inflation remains stable around 2%.
• The economic outlook is clouded by external risks, particularly the threat of new US tariffs. Meanwhile, domestic conditions show a soft labour market, weak business investment, and moderate GDP growth projections of 1.8% in 2025 and 2026.
• The Bank has signalled a cautious, data-dependent approach to future rate adjustments, monitoring inflation risks, trade policy developments, and the effectiveness of past monetary easing.