Bank of Canada Holds Benchmark Rate at 2.75% Amid Global Trade Uncertainty

In a cautious move reflecting rising global economic uncertainty, the Bank of Canada has opted to hold its benchmark interest rate steady at 2.75%, halting a series of seven consecutive cuts.

This marks the first pause in rate adjustments since June, as policymakers weigh the economic fallout from escalating international trade tensions, particularly with the United States. Bank of Canada Governor Tiff Macklem said the decision is intended to give the central bank more time to assess how evolving trade dynamics may influence Canada’s economic trajectory.

“We need more clarity on the broader implications of U.S. tariffs and other global developments,” Macklem said during a press briefing. “Our focus remains on maintaining inflation control while navigating this uncertain landscape.”

The Bank released two forward-looking scenarios to illustrate potential outcomes. The first—a more optimistic view—assumes a swift resolution to trade disputes, resulting in minimal economic disruption. The second outlines a prolonged global trade war, which could plunge Canada into a year-long recession.

While the Bank has signalled it is ready to adjust rates again if needed, Macklem emphasized a prudent, data-driven approach moving forward.

With inflation nearing the Bank’s 2% target, this pause underscores a broader strategy of economic vigilance rather than aggressive intervention. Analysts say the central bank’s next moves will hinge heavily on global market conditions and the pace of trade negotiations in the coming months.