Bank of Canada: Monetary Policy Report—July 2025

Good morning. I’m pleased to be here with Senior Deputy Governor Carolyn Rogers to discuss today’s monetary policy decision. Today, Governing Council held the policy interest rate at 2.75%. This decision reflects three main considerations. First, uncertainty about US tariffs on Canada is still high. Discussions between Canada and the United States are ongoing, and US policy remains unpredictable. Second, while US tariffs are disrupting trade, Canada’s economy is showing some resilience so far. Third, inflation is close to our 2% target, but we see evidence of underlying inflation pressures. Today’s interest rate decision is accompanied by our July Monetary Policy Report (MPR). As in April, we have decided not to present a conventional forecast for growth and inflation. US tariffs are still too unpredictable to be able to provide a single forecast for the Canadian economy. So, we present three scenarios. The first is what we’re calling our current tariff scenario—it presents a view of how growth and inflation would evolve if the trade arrangements currently in place or agreed were to remain. The other two scenarios examine how things could play out if tariffs escalate, or if they de-escalate from where they are now BOC GOVERNOR MACKLEM REPEATS JUNE 4 REMARKS: THERE WAS CLEAR CONSENSUS TO HOLD OUR POLICY RATE UNCHANGED IN TODAY’S DECISION #Canada #interestrates #Macklem

The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%. 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. Against this backdrop, the July Monetary Policy Report (MPR) does not present conventional base case projections for GDP growth and inflation in Canada and globally. Instead, it presents a current tariff scenario based on tariffs in place or agreed as of July 27, and two alternative scenarios—one with an escalation and another with a de-escalation of tariffs. While US tariffs have created volatility in global trade, the global economy has been reasonably resilient. In the United States, the pace of growth moderated in the first half of 2025, but the labour market has remained solid. US CPI inflation ticked up in June with some evidence that tariffs are starting to be passed on to consumer prices. The euro area economy grew modestly in the first half of the year. In China, the decline in exports to the United States has been largely offset by an increase in exports to the rest of the world. Global oil prices are close to their levels in April despite some volatility. Global equity markets have risen, and corporate credit spreads have narrowed. Longer-term government bond yields have moved up. Canada’s exchange rate has appreciated against a broadly weaker US dollar. Bank of Canada Flags Rate Cut Possibility Amid Weak Economy • May cut rates if downward pressure on inflation persists and price pressures stay contained • Underlying inflation seen at ~2.5% • Q2 GDP likely contracted by 1.5% due to export decline • Signs of rising… BANK OF CANADA: WITH HIGH UNCERTAINTY ON TARIFFS, ECONOMY SHOWING RESILIENCE, ONGOING PRESSURE ON INFLATION, GOV COUNCIL DECIDED TO HOLD RATES STEADY (as markets expected) #Canada

On July 30, 2025, Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers answer questions from reporters following the policy rate decision and the release of the Monetary Policy Report.