What changed in the Bank of Canada statement — 12 March 2025

Bank of Canada cut policy at 2.75%. The Bank cut rates again but the tone turned more hawkish on inflation and forward guidance, while labour market weakness persists. The next decision will likely be data-dependent with limited scope for further easing if inflation remains elevated.

Decision

Decision: cut
Overnight rate: 2.75%

Going into the decision

On the day, the committee read as neutral — 0.2 on a scale where +3 means every member wants higher rates and −3 means every member wants cuts.

Reconstructed from official member remarks published before the decision date. 5 of 7 active members had stored official remarks.

What changed

The Bank cut rates again but the tone turned more hawkish on inflation and forward guidance, while labour market weakness persists. The next decision will likely be data-dependent with limited scope for further easing if inflation remains elevated.

Inflation — More hawkish. Inflation expectations shifted from near-target to an anticipated overshoot to 2.5% due to tax break expiry, a hawkish tilt.
Labour Market — More dovish. Labour market language moved from 'soft' with a specific unemployment rate to 'job growth stalled', reinforcing the case for continued easing.

Previous wording

The Bank of Canada today reduced its target for the overnight rate to 3%, with the Bank Rate at 3.25% and the deposit rate at 2.95%. The Bank is also announcing its plan to complete the normalization of its balance sheet, ending quantitative tightening.
rate path: Rate cut and end of QT signal continued easing, supporting growth.

Canada’s labour market remains soft, with the unemployment rate at 6.7% in December.
labour market: Soft labour market provides rationale for additional policy support.

CPI inflation remains close to 2%, with some volatility due to the temporary suspension of the GST/HST on some consumer products.
inflation: Inflation near target, allowing focus on growth risks.

Setting aside threatened US tariffs, the upside and downside risks around the outlook are reasonably balanced.
rate path: Risks balanced absent tariffs, but tariffs pose key downside risk.

However, if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested. We will be following developments closely and assessing the implications for economic activity, inflation and monetary policy in Canada.
rate path: Conditional guidance opens door to further easing if tariffs materialize.

As such, the Bank will restart its term repo program effective March 5, 2025 and operations will be conducted every two weeks.
rate path: Provides liquidity backstop; technical normalization step, not a directional signal.

Purchases of GoC bonds will likely not need to start until towards the end of 2026 at the earliest based on current projections for the Bank’s future asset needs.
rate path: Delays any potential QE, reinforcing that conventional easing is off the table for now.

In the absence of new tariffs, growth is forecast to strengthen, and inflation remains close to 2%.
inflation: Inflation on target supports current policy stance, but conditions heavily depend on tariff outcome.

But the threat of new tariffs is causing major uncertainty.
rate path: Highlights a key downside risk that may weigh on growth and delay any tightening.

Current wording

The Bank of Canada today reduced its target for the overnight rate to 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%.
rate path: Rate cut signals easing monetary policy.

In February, job growth stalled.
labour market: Weak labour market data supports rate cut.

Inflation is expected to increase to about 2½% in March with the end of the tax break.
inflation: Near-term inflation overshoot above target.

However, heightened trade tensions and tariffs imposed by the United States will likely slow the pace of economic activity and increase inflationary pressures in Canada.
rate path: Stagflation risk: weaker growth and higher inflation.

Monetary policy cannot offset the impacts of a trade war. What it can and must do is ensure that higher prices do not lead to ongoing inflation.
rate path: Reinforces inflation-fighting commitment, limits scope for further easing.

Governing Council will be carefully assessing the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.
rate path: Data-dependent approach, no clear bias.

While economic growth has come in stronger than expected, the pervasive uncertainty created by continuously changing US tariff threats is restraining consumers’ spending intentions and businesses’ plans to hire and invest. Against this background, and with inflation close to the 2% target, Governing Council decided to reduce the policy rate by a further 25 basis points.
rate path: Justifies cut due to uncertainty, despite stronger growth.

Official statement

Bank of Canada reduces policy rate by 25 basis points to 2¾%

The Bank of Canada today reduced its target for the overnight rate to 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%.

The Canadian economy entered 2025 in a solid position, with inflation close to the 2% target and robust GDP growth. However, heightened trade tensions and tariffs imposed by the United States will likely slow the pace of economic activity and increase inflationary pressures in Canada. The economic outlook continues to be subject to more-than-usual uncertainty because of the rapidly evolving policy landscape.

After a period of solid growth, the US economy looks to have slowed in recent months. US inflation remains slightly above target. Economic growth in the euro zone was modest in late 2024. China’s economy has posted strong gains, supported by government policies. Equity prices have fallen and bond yields have eased on market expectations of weaker North American growth. Oil prices have been volatile and are trading below the assumptions in the Bank’s January Monetary Policy Report (MPR). The Canadian dollar is broadly unchanged against the US dollar but weaker against other currencies.

Canada’s economy grew by 2.6% in the fourth quarter of 2024 following upwardly revised growth of 2.2% in the third quarter. This growth path is stronger than was expected at the time of the January MPR. Past cuts to interest rates have boosted economic activity, particularly consumption and housing. However, economic growth in the first quarter of 2025 will likely slow as the intensifying trade conflict weighs on sentiment and activity. Recent surveys suggest a sharp drop in consumer confidence and a slowdown in business spending as companies postpone or cancel investments. The negative impact of slowing domestic demand has been partially offset by a surge in exports in advance of tariffs being imposed.

Employment growth strengthened in November through January and the unemployment rate declined to 6.6%. In February, job growth stalled. While past interest rate cuts have boosted demand for labour in recent months, there are warning signs that heightened trade tensions could disrupt the recovery in the jobs market. Meanwhile, wage growth has shown signs of moderation.

Inflation remains close to the 2% target. The temporary suspension of the GST/HST lowered some consumer prices, but January’s CPI was slightly firmer than expected at 1.9%. Inflation is expected to increase to about 2½% in March with the end of the tax break. The Bank’s preferred measures of core inflation remain above 2%, mainly because of the persistence of shelter price inflation. Short-term inflation expectations have risen in light of fears about the impact of tariffs on prices.

While economic growth has come in stronger than expected, the pervasive uncertainty created by continuously changing US tariff threats is restraining consumers’ spending intentions and businesses’ plans to hire and invest. Against this background, and with inflation close to the 2% target, Governing Council decided to reduce the policy rate by a further 25 basis points.

Monetary policy cannot offset the impacts of a trade war. What it can and must do is ensure that higher prices do not lead to ongoing inflation. Governing Council will be carefully assessing the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs. The Council will also be closely monitoring inflation expectations. The Bank is committed to maintaining price stability for Canadians.

Information note

The next scheduled date for announcing the overnight rate target is April 16, 2025. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time.

How Canadian businesses and households are reacting to the trade conflict

To better understand how the trade conflict initiated by the US administration is affecting the economic decisions of Canadians, the Bank of Canada has enhanced its consultations with businesses and households.

Press Conference: Policy Rate Announcement – March 2025

Interest Rate Announcement — Press conference by Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers (10:30 (ET) approx.).

Monetary Policy Decision Press Conference Opening Statement

Governor Tiff Macklem discusses key issues involved in the Governing Council’s deliberations about the monetary policy decision.

Summary of Governing Council deliberations: Fixed announcement date of March 12, 2025

This is an account of the deliberations of the Bank of Canada’s Governing Council leading to the monetary policy decision on March 12, 2025.

Read the official source

Full meeting record · Press conference transcript · Previous statement · Next statement

Background reading

Cadence's comparison is generated from the official documents. Read the methodology.