BoC held its fee on June 4—right here’s why

The central bank will be watching the tariff dispute’s impact on inflation as it gauges future policy decisions.

When is the next BoC announcement?

The Bank of Canada’s next interest rate decision is set for July 30, alongside a new monetary policy report. CIBC chief economist Avery Shenfeld said in a note to clients Wednesday that he is expecting a quarter-point rate cut in July if the jobs market shows more cracks and inflation eases on non-tariffed items. He said he sees another cut in September, bringing the policy rate down to 2.25%.

While the economy topped the Bank of Canada’s expectations in the first quarter of the year and annual inflation dipped back below two per cent in April, the central bank said it sees signs of concern beneath the headline figures.

What is Canada’s inflation rate?

Inflation dipped to 1.7% in April largely thanks to the federal government’s removal of the consumer carbon price, which drove down prices at the gas pump. Without including taxes, inflation would have stood at 2.3% in the month, up from 2.1% in March and surpassing the central bank’s expectations.

There was some “unexpected firmness” in the latest price data, the central bank said, particularly in rising core inflation figures.

Macklem said that while it’s “still too soon” to the see the impact of retaliatory tariffs in the consumer price data, signs of a resurgence in underlying pressures “may reflect the effects of trade disruption.”

Will there be more Bank of Canada rate cuts?

Although the central bank’s decision suggests it isn’t eager to cut much further, said BMO chief economist Douglas Porter in a note, “we suspect that a combination of softer activity and milder core inflation trends will prompt additional action.”

Even with slowing inflation, the expected economic slowdown leaves the door “wide open” for a cut in July, he said.

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