The central bank chose to keep its overnight loan ratio at a loan ratio of 2.75% (the lender used to set its maximum interest rate and the variable mortgage rate) at 2.75%.
This is the second consecutive rate of BOC after the velocity pause of the suspension on April 16. Prior to this, BOC steadily reduced its rate through a series of seven-level reduction rates between June 2024 and March 2025. Overall, these reductions reduce the overnight speed by 225 basis points, from previous highs to 2.75% today.
As a result, the discounted interest rates used by Canadian lenders will also remain unchanged at 4.95%.
Emotions around interest rates
Economists largely anticipated this latest BOC rate. However, as tariffs continue to confuse the economic outlook, the move (or non-mobile) poses a challenge to the BOC. The data banks consider when making interest rate decisions also give different signals.
The latest April inflation report, while showing promising title count of 1.7%, suggests that the core measures of inflation, such as the median measure of the CPI basket, have risen above 3%. This is bad news for the BOC because it shows that consumers’ prices are indeed getting stronger due to tariffs. The more read volume than the BOC forecast, the reason for the Banking Administration Council may be sufficient to choose other interest rates.
But, on the other hand, the Canadian economy is starting to show signs of weakness. The latest quarterly GDP report shows that despite a 2.2% increase in the last quarter (again, much stronger than expected), companies are rushing to quickly stockpile inventory before the full tariffs, but due to temporary front impacts on exports. Once this impact gradually fades, Canada’s economic growth is expected to cool down in the coming months.
“In Canada, the first quarter economic growth rate was 2.2%, stronger than banks predicted, and the composition of GDP growth was largely expected,” the BOC press release on interest rate holdings said. “The attraction of exports and inventory accumulation to the United States promoted activity, and ultimately domestic demand was roughly flat.”
“The economy is expected to be weak in the second quarter, with reversal of exports and inventory strength and ultimately domestic demand remain soft.”
Overall, this has led banks to add more stimulus to the economy now and reduce it to a slower rate until the economy shows further signs of stress.
