Bank of Canada holds key rate at 2.75% amid US tariff uncertainty

By Mucahithan Avicoglu

ISTANBUL (AA) – The Bank of Canada kept its benchmark overnight rate steady at 2.75% on Wednesday, citing ongoing trade policy uncertainty and inflationary pressures, as the US threatens new sector-specific tariffs.

The central bank’s statement said the bank rate remains at 3%, and the deposit rate at 2.70%, in line with market expectations.

“While some elements of US trade policy have started to become more concrete in recent weeks, trade negotiations are fluid, threats of new sectoral tariffs continue, and US trade actions remain unpredictable,” the bank said.

It warned that while US-imposed tariffs have contributed to volatility in global trade, the broader global economy has shown resilience. However, trade uncertainty is holding back business investment and household spending.

The labor market, the bank said, is weakening in trade-affected sectors, though employment in other areas remains stable.

The statement reaffirmed that the current policy rate would be maintained in the face of “continued high uncertainty and persistent inflationary pressures.” The central bank said it would monitor the balance between downward and upward forces on inflation.

“If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate,” the bank said.

It added that its current approach is cautious, emphasizing close attention to economic risks and uncertainties.

The central bank has cut its policy rate gradually from 5% in June last year to 2.75% in March 2025. It has kept the rate unchanged for the past three consecutive meetings.