1. April’s Economy Shrank Slightly
Canada’s gross domestic product (GDP) dropped by 0.1% in April, with manufacturing and wholesale trade taking the biggest hits rbc.com+2reuters.com+2wsj.com+2.
A small decline of 0.1% in May is expected too, hinting that the economy is cooling off wsj.com+1reuters.com+1.
2. Inflation is Tame—But Some Pressure Remains
Overall inflation in May stayed at 1.7% year-over-year, flat from April. Key drivers like gas, shelter, food, and transport prices eased reuters.com+1reuters.com+1.
However, core inflation—which strips away volatile items—remains around 3%, just on the Bank of Canada’s upper target edge realeconomy.rsmus.com+2reuters.com+2wsj.com+2.
3. Trade Tensions Add Uncertainty
Heavy U.S. tariffs on steel and aluminum are a big worry. These tariffs hit Canada's trade sectors and add unpredictability reuters.com+10reuters.com+10reuters.com+10.
The Bank is watching closely, communicating that it's staying cautious until the full impact of these trade shocks is clear ft.com+8reuters.com+8wsj.com+8.
4. Mixed Data Leads to a Pause
The BoC paused rate cuts in April, and again in June, officially resting at 2.75% wsj.com+7realeconomy.rsmus.com+7rbc.com+7.
The Bank’s decision reflects a balancing act: waiting to see more data on economic slowdown, inflation trends, jobs, and trade dynamics costar.com+3reuters.com+3wsj.com+3.
5. What the Bank Might Do Next
The door is still open for 2–3 rate cuts by the end of 2025, depending on economic conditions wsj.com+13reuters.com+13marketwatch.com+13.
Right now, markets estimate about a 60–68% chance that rates stay the same at the July meeting reuters.com.
In a Nutshell:
Growth: Slight contraction in April, expected dip in May.
Inflation: Tame overall, but core inflation remains firm.
Trade shocks: US tariffs are a wildcard.
Bank’s view: Staying cautious—no rush to cut, but ready if needed.
✅ Why We Shared These Sources
We drew from reputable news reports from Reuters, The Wall Street Journal, and more, to distill key facts while giving credit properly wsj.com+3reuters.com+3realeconomy.rsmus.com+3wsj.com+3reuters.com+3reuters.com+3.
This ensures respect for copyright while helping you stay well-informed.
Your Takeaway
The Bank of Canada is likely to keep rates steady at 2.75% in July, watching carefully for signs of deeper economic weakness or inflation shifts. The next few months of data will be critical in deciding whether to cut rates later this year.
