“I think we and 99% of the rest of the world are expecting no change from the Bank of Canada,” said Douglas Porter, Chief Economist at BMO. “The bank seems very comfortable keeping rates at the midpoint of what they consider neutral.”
📊 Inflation Pressures Persist
Despite softer GDP readings, underlying inflation has not cooled significantly. Some tariff-related price pressures—particularly in clothing and autos—continue to feed into core inflation. Many businesses are absorbing higher input costs rather than passing them fully on to consumers, keeping retail prices from spiking further.
Desjardins Chief Economist Jimmy Jean cautions that policymakers will remain watchful:
“From a risk management perspective, they’re staying alert for delayed impacts. We could still see more pass-through into consumer prices.”
💼 Labour Market Surprises Economists
Canada’s unemployment rate fell to 6.9% in June from 7% in May, with the economy adding 83,000 jobs—though mostly part-time. Economists say this is a sign that Canada is not in recession, despite challenges in specific industries.
Porter noted:
“Anytime you have a pullback in unemployment, that’s good news. It tells us that while some sectors are hit hard, the broader economy is managing.”
🔮 Growth Forecasts and Trade Risks
While the Bank has avoided issuing a formal forecast this year, upcoming guidance will be closely watched. Oxford Economics outlines two key scenarios:
- ✅ Trade Deal Scenario: Tariffs are lifted, growth slows but averages 1.6% through 2027.
- ⚠️ Protracted Trade War: GDP contracts for four quarters, averaging -1.2%.
After front-loaded inventory growth in Q1, April GDP contracted by 0.1%, with May showing a similar trend, suggesting momentum is fading heading into the second half of 2025.
💡 What This Means for Borrowers and Investors
For homeowners and investors, a rate hold offers short-term stability in borrowing costs. However, sticky inflation and lingering trade risks could prompt future adjustments.
At Lendworth, we’re helping clients navigate this shifting landscape with tailored financing solutions—from refinancing strategies to investment mortgage planning.
📩 Connect with our experts at www.lendworth.ca to explore how stable rates can work in your favor.