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The Bank of Canada held its benchmark interest rate steady at 2.75 per cent on Wednesday, hitting pause on its easing campaign after seven consecutive cuts.
The bank held off publishing a central forecast amid uncertainty about U.S. trade policy, but outlined two possible scenarios. The downside scenario sees Canada entering a recession this year and inflation rising above 3 per cent.
Canada’s inflation rate surprisingly cooled in March as travel-related prices fell during the month, coinciding with a sharp pullback in trips to the United States during the trade war.
The consumer price index rose 2.3 per cent in March from a year earlier, down from 2.6 per cent in February, Statistics Canada said on Tuesday. Financial analysts were expecting higher inflation of 2.7 per cent, because of upward pressure from the end of the federal tax holiday in mid-February.
Consumer prices rose 0.3 per cent in March from February, lagging way behind estimates of a 0.7-per-cent gain.
Inflation has largely resided near the Bank of Canada’s 2-per-cent target since last summer, allowing the central bank to cut interest rates at seven consecutive meetings.
But the bank’s next rate decision, on Wednesday, is hardly certain, because of the fallout from the global trade war launched by U.S. President Donald Trump.
Economists and analysts are roughly split over whether the Bank of Canada will cut rates again or hold them steady at 2.75 per cent. The interest rate swaps market – which captures investor expectations of monetary policy – is suggesting it’s a coin-flip outcome, according to LSEG data.
Still, the soft inflation report has bulked up bets that another cut is imminent.
“The central bank will be weighing the inflation risk from tariffs against the downside risk coming from consumer/business sentiment surveys, a loosening job market, and a very weak real estate market,” James Orlando, senior economist at Toronto-Dominion Bank, said in a client note.
“We are maintaining our call for another cut from the bank, as it should take out more insurance against the mounting downside risks to the economy,” he added.
Tuesday’s inflation report showed a cooldown on several fronts. Gasoline prices fell 1.8 per cent in March from February. Excluding gas, the CPI rose 2.5 per cent on an annual basis, down from 2.6 per cent in February.
Travel prices, which often swing wildly because of seasonal demand, fell notably during the spring break period. Prices for travel tours fell 8 per cent in March from February, while airfare prices tumbled 12 per cent from a year earlier.
Statscan has published several reports that show Canadians are forgoing trips to the U.S. to protest Mr. Trump’s tariffs and his repeated jibes about Canadian sovereignty. The number of Canadians returning from the U.S. by car plummeted 32 per cent in March, year over year.
The Bank of Canada’s preferred measures of core inflation – which strip out volatile movements in the CPI – also eased in March. On a three-month annualized basis, those measures rose by an average of 2.7 per cent in March, down from 3.3 per cent in February.
The Bank of Canada faces a unique challenge in a trade war, which constrains economic growth but pushes up prices – outcomes that typically prompt different decisions from the central bank.
Canada is facing 25-per-cent tariffs on imports that aren’t compliant with the North American trade pact, along with sectoral duties on steel, aluminum, autos and lumber.
To date, Canada has imposed 25-per-cent tariffs on $60-billion of U.S. goods imports, along with duties on U.S.-made vehicles. These tariffs will raise prices for Canadian consumers, but are intended to put pressure on the Trump administration to reverse its trade policies.
Bank of Canada Governor Tiff Macklem has repeatedly stressed that interest rates won’t likely be cut to near-zero levels, as they were in the pandemic. The central bank is trying to prevent a tariff-induced price shock from escalating into persistently higher inflation.
Gold prices were subdued on Monday, after having touched record highs earlier in the session.
Spot gold slipped 0.2 percent to $3,229.56 per ounce in European trade after hitting a new record high of $3,245.42 per ounce earlier.
U.S. gold futures were little changed at $3,244.79, with a softer dollar helping cap bullion’s downside.
The dollar remained weak after reports emerged that the Trump administration’s exemptions on electronic devices from tariffs may not last long.
U.S. Commerce Secretary Howard Lutnick said Sunday that the exemptions aren’t permanent and that smartphones and computers as well as other devices and components would be subject to “semiconductor tariffs” that will likely come in “a month or two,” stirring up more tariff uncertainty.
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Also, Trump said in a Truth Social post that these products are still “subject to the existing 20 percent Fentanyl Tariffs, and they are just moving to a different Tariff bucket.
Goldman Sachs has raised gold price target to $3,700 an ounce by end-2025, citing heightened concerns over the U.S. economy fueled by an escalation in the U.S.-China trade war.
In economic releases, U.S. reports on retail sales, industrial production, import and export prices and housing starts will be in the spotlight this week.
Several Fed officials are set to speak this week, including Fed Chair Jerome Powell on Wednesday.
Statistics Canada says wholesale trade, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.3 per cent to $85.7-billion in February.
The overall increase in sales came as just two of the seven subsectors posted gains.
Statistics Canada says sales in the machinery, equipment and supplies subsector gained 7.1 per cent for the month to $19-billion, while the food, beverage and tobacco subsector rose 0.5 per cent to $15.5-billion.
The motor vehicle and motor vehicle parts and accessories subsector posted the largest decrease as it fell 3.1 per cent to $14.3-billion.
In volume terms, wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, increased 0.2 per cent in February.
Statistics Canada has started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade, but is excluding the data from its monthly analysis until there is enough historical data.
Oil prices traded higher on Monday, with a weaker dollar and geopolitical tensions offering some support. There was some cheer as Chinese data showed a sharp rebound in crude imports in March.
China’s crude oil imports in March were up nearly 5 percent from a year earlier, boosted by Iranian oil and a rebound in Russian deliveries.
Benchmark Brent crude futures rose 0.6 percent to $65.15 a barrel in European trade while WTI crude futures were up 0.7 percent at $61.93.
The dollar remained weak as investors grappled with the latest tariff headlines.
Traders looked past a reprieve on the imposition of certain electronic tariffs after U.S. President Donald Trump downplayed his exemption for the technology sector.
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On the geopolitical front, at least 34 people were killed and another 117, including 11 children, were injured by a Russian missile attack on the northern Ukrainian city of Sumy, Ukraine’s state emergency service said.
This was the deadliest attack on Ukraine this year and Trump called it a “horrible thing” and a “mistake”.
Elsewhere, the death toll from Israel’s attacks on Gaza on Sunday rose to 37 as condemnation grows over attack on al-Ahli Hospital.
Iran’s Foreign Minister Abbas Araghchi is set to visit Moscow this week to discuss recent nuclear negotiations with the United States held in Oman.
While speaking with reporters on Air Force One on Sunday night, Trump said the goal behind the specific tariff is to “uncomplicate” trade in the semiconductor sector.
“We wanted to uncomplicate it from a lot of other companies, because we want to make our chips and semiconductors and other things in our country,” Trump said while traveling back to Washington, D.C. from West Palm Beach.
The talks took place on the outskirts of Oman’s capital, Muscat, and lasted just over two hours. Omani Foreign Minister Said Badr hosted the meeting.
Iranian state TV later confirmed the sides exchanged several rounds of messages, and there was a short, direct conversation between the American and Iranian diplomats.
Military pressure appears to be a big reason Iran came to the table. Rebecca Grant, a senior fellow at the Lexington Institute, told the “Fox Report” Saturday the U.S. has sent a clear signal by moving powerful military assets into the region.
TRUMP DEMANDS DO-OR-DIE NUCLEAR TALKS WITH IRAN. WHO HAS THE LEVERAGE?
“All the options are not only on the table. They’re all deployed to the Middle East,” Grant said. “Somewhere between four and six B-2 stealth bombers [are] forward in Diego Garcia, [along with] two aircraft carriers. That has really gotten Iran’s attention.”
https://www.cnbc.com/2025/04/12/trump-exempts-phones-computers-chips-tariffs-apple-dell.html
Monday April 14
China trade surplus, aggregate yuan financing and new yuan loans
Japan industrial production
(8:30 a.m. ET) Canadian wholesale trade for February. Estimate is a month-over-month rise of 0.4 per cent (versus a gain of 1.2 per cent in January).
(8:30 a.m. ET) Canada’s new motor vehicle sales for February. Estimate is a year-over-year drop of 8.0 per cent.
Earnings include: Goldman Sachs Group Inc.; M&T Bank Corp.; PrairieSky Royalty Ltd.; Well Health Technologies Corp.
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Tuesday April 15
Euro zone industrial production
(8:30 a.m. ET) Canadian housing starts for March. Estimate is an annualized increase of 0.4 per cent.
(8:30 a.m. ET) Canada’s CPI for March. The Street projects a month-over-month gain of 0.7 per cent an a year-over-year rise of 2.7 per cent.
(8:30 a.m. ET) Canaa’s manufacturing sales and new orders for February. Estimates are month-over-month declines of 0.2 per cent and 0.5 per cent, respectively.
(8:30 a.m. ET) U.S. import prices of March. Consensus is a flat reading from February and up 1.4 per cent year-over-year.
(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for April.
(9 a.m. ET) Canada’s existing home sales and average prices for March. Estimates are year-over-year drops of 10.0 per cent and 1.5 per cent, respectively.
(9 a.m. ET) Canada’s MLS Home Price Index for March. Estimate is a decline of 1.5 per cent year-over-year.
Earnings include: Bank of America Corp.; Citigroup Inc.; Groupe Dynamite Inc.; Johnson & Johnson; PNC Financial Services Group Inc.; Rio Tinto ADR; United Airlines Holdings Inc.
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Wednesday April 16
China GDP, industrial production, retail sales and fixed asset investment
Japan core machine orders
Euro zone CPI
(8:30 a.m. ET) U.S. retail sales for March. Consensus is a gain of 1.4 per cent from February (or 0.4 per cent excluding automobiles)
(9:15 a.m. ET) U.S. industrial production and capacity utilization for March.
(9:45 a.m. ET) Bank of Canada policy announcement and Monetary Policy Report with press conference to follow.
(10 a.m. ET) U.S. NAHB Housing Market Index for April.
(10 a.m. ET) U.S. business inventories for February.
(1:30 p.m. TE) U.S. Fed Chair Jerome Powell speaks to the Economic Club of Chicago.
(8 p.m. ET) Canada’s federal leaders debate (French)
Earnings include: Abbott Laboratories; Alcoa Corp.; BHP Group Ltd. ADR; CSX Corp.; Kinder Morgan Inc.; Metro Inc.; Progressive Corp.; Prologis Inc.; U.S. Bancorp.
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Thursday April 17
Japan trade surplus
ECB monetary policy meeting
(8:30 a.m. ET) Canada’s international securities transactions for February.
(8:30 a.m. ET) Canada’s household and mortgage credit for February.
(8:30 a.m. ET) U.S. initial jobless claims for week of April 12. Estimate is 226,000, up 3,000 from the previous week.
(8:30 a.m. ET) U.S. housing starts for March. Consensus is an annualized rate decline of 5.4 per cent.
(8:30 a.m. ET) U.S. building permits for March. Consensus is an annualize rate drop of 0.6 per cent.
(7 p.m. ET) Canada’s federal leaders debate (English)
Earnings include: Blackstone Inc.; Charles Schwab Corp.; DR Horton Inc.; Hermes International SA; L’Oreal ADR; Taiwan Semiconductor Manufacturing Corp. Ltd.; Truist Financial Corp.; UnitedHealth Group Inc.
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Friday April 18
Japan CPI
Euro zone markets closed
Canadian markets closed
U.S. stock markets closed with limited bond market activity
