Bank of Canada Rate Decrease
Bank of Canada Rate Decrease
Date Posted: March 12, 2025
The Rate Announcement
The Bank of Canada has lowered its key interest rate to 2.75% in response to growing uncertainty in the global economy, particularly due to new trade tensions and tariffs from the United States.
While Canada entered 2025 in a strong position—with solid economic growth, stable inflation near the 2% target, and a recovering job market—these trade issues are starting to affect consumer and business confidence. Spending, hiring, and investment plans are slowing down, and although exports have temporarily increased ahead of new tariffs, overall growth is expected to slow in the coming months.
Inflation remains close to target, but rising costs from tariffs could push it higher. The rate cut is meant to support the economy during this period of uncertainty, but the Bank acknowledges that monetary policy alone cannot fix the effects of a trade war. Moving forward, the Bank will closely monitor inflation, economic growth, and public expectations to ensure price stability is maintained for Canadians.
What Does This Impact?
The Bank of Canada’s target overnight policy rate affects the interest you pay from lenders like banks. The higher the overnight rate, the more interest you will pay. The December 2024 drop from the Bank of Canada means that variable and adjustable mortgage holders will see a decrease in their interest costs and possibly a decrease in their mortgage payments. Fixed rate mortgages are not as directly impacted by the BOC rate announcement, however the bond markets which influence fixed rates have largely already built in the expected 0.25% rate drop.
Getting Back on Track
Despite these challenges, inflation remains close to the Bank's 2% target. The Bank projects that inflation will stay around this level over the next two years, supported by recent policy actions and stable global economic growth.
The next rate announcement is scheduled for April 16th, 2025.
If you have questions about your own mortgage, and the best strategy for you, please contact your broker today.
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