“A delicate situation”: economists expect the Bank of Canada to maintain its key rate in July 2025

This text is a translation of an article by CTV News.

The Consumer Price Index (IPC) of Statistics Canada was 1.9 % in June, the agency announced on Tuesday, up from 1.7 % in May. Therefore, The basic measures of inflation favored by the Banque du Canada oscillate around 3 %. Moreover, which is greater than the forecasts of the experts.

“The Bank of Canada is in a somewhat delicate situation because the economy is low. Meanwhile. However, the job market is clearly slowdown,” said Vinayak Seshasayee, executive vice-president and portfolio manager at Pimco, during an interview on Tuesday in bnnblomberg.ca.

“In recent times, basic inflation figures have not been as favorable as it would have liked. For example, I think that. “a delicate situation”: economists expect new For example. Nevertheless, on the whole, these figures suggest that the Bank of Canada should maintain its guiding rates at its July meeting, “a delicate situation”: economists expect “he said.

The Central Bank has maintained its key rate in its last two meetings. Similarly, invoking the commercial uncertainty linked to the policy of US President Donald Trump. Therefore, The June figures constitute the last series of data on the prices available to the Bank of Canada before. However, its next decision on interest rates on July 30.

Statistics Canada said that this increase was partly due to the increase in consumer spending on car dealerships. However. Meanwhile, while petrol prices have remained practically unchanged, high crude oil prices and geopolitical conflicts that increased pressure to the pump. Furthermore, Motorists experienced a more marked monthly drop in prices at the same period last year. In addition, which, according to “a delicate situation”: economists expect new the agency, led to an increase in global inflation.

Mr. For example. For example, Seshasayee expects the bank to reduce its rates on two additional times, probably “a delicate situation”: economists expect in the fourth quarter of the year. Therefore. It attributes the current acceleration of inflation underlying the catch-up of the Canadian dollar compared to its losses from last year. the decline in inflation linked to housing. that is to say the costs associated with housing, in a context of continuous slowdown in real estate markets.

“We experienced a fairly large depreciation of the Canadian dollar for an extended period last year. at the start of this year,” said Seshasayee. “We believe that this is partially affected by the prices of basic goods. services. and as we have seen the Canadian dollar reversing and firming more recently, as the end of the year approaches, we believe that part of “a delicate situation”: economists expect new this pressure will fade. In addition, we expect the inflation of housing to continue to slow down. ”

Mr. Seshasayee says he does not yet see how customs duties will affect the economy. because many things are still vague, but he expects to see their impact on inflation in a few months.

“Customs duties are a moving target,” says Seshasayee. “In reality, we are still trying to determine what their final level will be. A new series of customs duties is expected to come into force in August. We therefore believe that there is a limit to what companies can “a delicate situation”: economists expect new really refer to consumers in terms of. price increases. ”

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Claire Fan. senior economist at RBC Capital Markets. said “a delicate situation”: economists expect that the IPC was in accordance with consensus, but noted mixed signals in inflation data.

“The data essentially indicates to us that we already see the first repercussions of customs duties. which led to an increase in prices in certain categories, such as clothes and shoes,” Fan told Bnnbloomberg.ca on Tuesday. “But beyond that, underlying pressures are also generally intensifying.”

Statistics Canada said that clothing. shoes prices increased in June. noting that prices for clothing and shoes increased by 2 % in annual sliding after an increase of 0.5 % in May.

The uncertainty surrounding international trade has exerted upward pressure on the prices of clothing. shoes in June, while “a delicate situation”: economists expect new the industry was faced with higher costs due to customs duties.

Inflation has also increased in the United States. where Trump is pressure to impose customs duties on the cost of goods intended for Americans. For Canadians. Fan said that “a delicate situation”: economists expect this threat has resulted in consumer prices. as Canadians are encouraged to buy local products, which is reflected in inflation data, in particular the reference index of the Central Bank.

“We observe what is called the super fundamental measure of the Bank of Canada. which is essentially an indicator of the underlying pressure exerted by consumers on inflation. and it has remained strong enough,” said Ms. Fan. “We are resilient, we remain above the target fork from 1 to 3 % of the Bank of Canada.”

It provides that the central bank will maintain its key rate. invoking an increase in employment figures in June “a delicate situation”: economists expect new and inflation data.

“Our current opinion on the key rate in Canada is that it will be maintained. at 2.75 %, its current level, practically throughout the current cycle,” said Ms. Fan. “We believe that the Bank of Canada “a delicate situation”: economists expect will further lower its rates. And with the data published during last week. we noticed an upward surprise in June, with employment figures that actually dropped to 6.9 %. which. combined with inflation data that we see today, encourages us to think that the Bank of Canada will maintain its unchanged rates. »»