Key Takeaways:
- The Bank of Canada (BoC) will make its next rate announcement on April 16.
- TD Economics predicts another 25 basis point rate cut, but a rate hold at 2.75% is still on the table.
- A rate cut means cheaper borrowing costs; a rate hold means status quo for most Canadians.
- Economic uncertainty due to U.S. tariffs and shifting labour market signals could sway the BoC’s decision.
- TD Economics expects the BoC to gradually bring the rate to 2% by the end of 2025.
Table of Contents
The Countdown to April 16: What’s at Stake?
All eyes are on the Bank of Canada as it gears up for its next rate decision on April 16. After two back-to-back 25 basis point cuts earlier this year—in January and March—the key question is: Will there be a third cut?
Economists, financial institutions, and Canadians alike are waiting for the verdict. James Orlando, Director of Economics at TD, says it’s a close call: “The central bank might cut again, or it could hold steady at 2.75%. The latest economic data leans slightly toward another cut.”
Economic Signals: What’s Pushing the BoC to the Edge?
✔️ Strong Growth, Rising Spending
Despite external pressures, Canada’s economy has shown surprising resilience. Consumer spending is rebounding, and auto sales are performing well. Before recent uncertainties, GDP growth was looking strong for 2025.
But this growth brings a side effect: inflation. More demand pushes prices up, and that could give the BoC a reason to pause further rate cuts.
⚠️ The Tariff Cloud
Then comes the wildcard: U.S.-imposed tariffs on Canadian exports. These could dampen the economy in the months ahead. Orlando warns this is more than just a short-term blip—it could reshape the BoC’s entire 2025 outlook.
“If the future looks rocky,” he explains, “the BoC might act preemptively and cut rates now—taking out some ‘insurance’ against future economic weakness.”
📉 Labour Market Weakness
One more factor: cracks in Canada’s job market. Emerging softness in employment could further motivate the BoC to keep the economy stimulated with another rate cut.
What Happens If the BoC Cuts Rates?
If the BoC trims its lending rate again, the impact will ripple through:
- 🏡 Variable-Rate Mortgage Holders: More of your payment goes toward the principal, and less toward interest. If you have variable payments, your monthly bill could drop.
- 💳 New Borrowers: Loans—whether for homes, cars, or personal use—could become more affordable.
- 📈 Markets and Business Loans: Lower rates stimulate business investment and spending, which could help cushion economic uncertainty.
What If They Hold the Rate at 2.75%?
A rate hold means no major change:
- Variable-rate and fixed-rate mortgage holders won’t see much difference.
- Borrowing costs remain steady.
- For most Canadians, it’s business as usual—at least for now.
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Looking Ahead: More Rate Cuts Coming in 2025?
According to TD Economics, the BoC’s journey isn’t over yet. Orlando forecasts that the central bank will slowly ease its policy rate to around 2% by year’s end.
“That 2% target is seen as a ‘sweet spot’—low enough to support growth without overheating the economy,” he says. “But getting there will depend on how the next few months play out.”
Final Thoughts: Rate Cut or Not, April 16 Is Pivotal
The BoC’s next move will shape borrowing, mortgages, and economic momentum across the country. Whether it pulls the trigger on a third cut or opts for a wait-and-see approach, the decision reflects deeper economic signals—tariffs, inflation, and labour dynamics.
Mark your calendars for April 16. It could signal the direction Canada’s economy is heading for the rest of 2025.
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