on July 30, 2025 
On Wednesday, July 30th, at its regular policy meeting, the Bank of Canada (BoC) held its target for the overnight rate at 2.75 per cent. This is the third straight pause in rate policy after seven consecutive rate drops. With most banks and mortgage lenders, this will mean consumer prime rates will continue at 4.95 per cent (5.10 per cent with TD Canada Trust).
Why did the Bank of Canada hold the policy rate?
The storey is still about uncertainty in the tariff situation with our largest trading partner, the United States. As the deadline of August 1st approaches with no trade deal signed, it’s looking increasingly likely that Canada will be facing 35% tariffs on goods exported to the U.S. (up from the existing 25% tariffs in place right now) on all non-CUSMCA compliant goods.
While the Canadian economy has held up surprisingly well so far in the face of some heavy tariffs (especially on the auto and metals sectors), an increase to 35% tariffs for an extended period of time will definitely cause significant financial damage to many industries and result in substantial job losses. The BoC recognizes that this would have a largely deflationary impact on the economy, and so if this series of events unfolds they would need to cut interest rates a bit to help stimulate the economy.
On the other hand, if a trade deal were to be negotiated in August or September that results in reduced tariffs from the current 25% level, then we could see the economy pick up and that would require the BoC to raise the policy rate a bit to help head off any lingering inflation.
So until the trade negotiations succeed or break down, the BoC is in a holding pattern.
What’s next for the policy rate?
There are still some economists predicting one or two more rate cuts this year, while there are others predicting that we’re at the bottom of the cycle and the next change will be a rate increase. It really comes down to which of the trade deal scenarios you think is the most likely to happen.
The next scheduled BoC rate announcement is September 17th, 2025.
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