- April 16, 2025
- Posted by: Melanie Scott
- Category: Market News
The Bank of Canada held its benchmark interest rate steady at 2.75% this morning. While the decision was widely expected following recent tariff-related uncertainty, yesterday’s softer-than-anticipated inflation data—CPI rose just 0.3% month-over-month versus the 0.7% forecast—had sparked some speculation that the bank might consider a rate cut.
The shift in U.S. trade policy, marked by everchanging tariffs and unpredictability, has increased economic uncertainty, dampened growth prospects, and driven up inflation expectations. In its April Monetary Policy Report, the BoC outlines two potential scenarios based on different U.S. trade policy paths. In the first, tariffs remain limited but uncertainty stays high; Canadian growth slows temporarily, while inflation hovers around the 2% target. In the second, a prolonged trade war pushes the Canadian economy into recession this year, with inflation spiking above 3% next year. The Bank notes that other trade policy outcomes are possible and emphasizes the unusually high degree of uncertainty surrounding economic projections due to the unprecedented nature of the current policy shift.
In the U.S., retail sales rose 1.4% month-over-month, exceeding expectations of 1.3%. Core sales (excluding autos) were also stronger than anticipated, up 0.5% versus the 0.4% forecast. This marks the largest monthly gain since January 2023. Notably, auto-related sales surged 5.3%, as consumers rushed to make purchases ahead of anticipated price hikes stemming from President Trump’s tariff policies. With steeper prices expected next year, shoppers are treating current conditions like a massive clearance sale.
Meanwhile in the UK, inflation eased to 2.6%, down from 2.8% and below the expected 2.7%. The British pound rose 0.25% against the U.S. dollar in response. The Bank of England is now widely expected to cut rates at its next meeting on May 8, after holding steady at 4.5% in March amid concerns about inflation and global economic uncertainty linked to U.S. trade actions.
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