Bank of Canada rate hold suggests possible future cut

The Bank of Canada kept its policy rate at 2.25% and said it expects modest growth while flagging trade and geopolitical uncertainty; economists noted a more dovish tone and said a rate cut could follow an economic shock.

The Bank of Canada kept its key policy rate at 2.25 per cent and said it expects modest economic growth this year. Governor Tiff Macklem included more language about uncertainty linked to U.S. trade policies and geopolitical events. Economists described the bank's tone as more dovish and more modest about its ability to forecast future rates. Some observers said the bank suggested a rate cut could occur if an economic shock materializes. Noted developments: - The Bank held its policy rate at 2.25 per cent. - Governor Macklem said U.S. trade restrictions and uncertainty are disrupting Canadian growth; GDP growth stalled in the fourth quarter and the unemployment rate was reported at 6.8 per cent. - Economists Royce Mendes and Earl Davis said communications showed greater uncertainty around CUSMA and geopolitical risks, and that the bank sounded more dovish and humble about forecasting. - Analysts noted that cutting rates could weaken the Canadian dollar and raise import costs, and that policies to boost project-driven productivity would take years to affect GDP. Summary: The decision keeps monetary policy unchanged while emphasising the bank's focus on inflation control amid trade and geopolitical uncertainty. Economists reported that a future rate cut remains a possibility if an economic shock occurs. Undetermined at this time.