Making sense of the Bank of Canada interest rate decision on July 30, 2025

This marks the third rate hold in a row from the Bank, following similar non-moves in June and April. Prior to this, the Bank was undergoing a cutting cycle, and had slashed its benchmark rate seven times, lowering it by 225 basis points between June 2024 and March of this year.

No surprises here—but risks remain 

This most recent hold was widely anticipated by economists; the deal was roughly sealed when the June inflation numbers came in, showing consumer price growth had risen to 1.9%. Not just that, but the core measures of the CPI (called the median and trim, which strip out the upper and lower extremes of price growth) remain elevated at 3%. This is the key inflation metric watched by the Bank when making its rate decisions.

Other factors that influenced the Bank’s decision were stronger-than-expected jobs numbers, and recent business and consumer surveys that revealed the economy has been hardier than expected in the face of tariffs. 

“With still high uncertainty, the Canadian economy showing some resilience, and ongoing pressures on underlying inflation, Governing Council decided to hold the policy interest rate unchanged,” stated the press release that accompanied the Bank’s statement. “We will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs related to tariffs and the reconfiguration of trade. If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate.”

The Bank also released a refreshed scenario outlook; while not a formal forecast (the Bank has declined to provide one of those since the start of the trade war due to its rapidly changing narrative), it provides a few possible outcomes for the economy, depending on what happens next with tariffs. Based on the current tariff situation, the Bank says GDP growth will shrink in Q2, before recovering to 1% growth in the second half of the year. It will then recover to 2% growth by the end of 2027.This is an improvement from the previous call of 1.6% growth by the end of that horizon.

What the BoC’s rate hold means if you’re a mortgage borrower

The group most directly impacted by the Bank’s rate decisions are variable-rate mortgage holders. This is because variable rates, which are priced based on a plus or minus percentage to a lender’s prime rate, move in conjunction with the Bank’s overnight lending rate.

For now, these borrowers will see no change to their current interest rate, or the size of their monthly payments. The amount of their payment that goes towards interest costs and their principal loan amount, also won’t change.

If you’re currently locked into a fixed-rate mortgage term, today’s announcement won’t impact you at all; your rate is set in stone until you come up for renewal. But for those who are currently shopping around for a fixed rate, or are indeed renewing their terms, today’s rate hold could translate to higher fixed-rate pricing. This is because fixed rates are set based on bond yields; lenders use bonds as part of their capital asset mix, and when yields are low, they pass those savings down via their fixed-rate products.