And with fresh inflation data landing just one day before the announcement, Tuesday’s CPI report could be what ultimately tips the scales.
The central bank will announce its decision Wednesday morning, alongside a new Monetary Policy Report and revised forecasts.
While economists broadly agree that rates are headed lower over time, a cut this week is far from a sure thing as policymakers balance growing recession risks against still-sticky inflation.
Case for a cut: Tariffs, soft data, and a fragile outlook
RBC and Scotiabank both note that if not for escalating trade tensions with the U.S., the Bank likely would have held in March.
With those risks still elevated, RBC expects the BoC will “opt to add another ‘insurance’ 25-basis-point cut” to cushion against a possible downturn.
The central bank’s Q1 Business Outlook Survey revealed faltering sentiment, with hiring intentions at their lowest levels since the pandemic and one-third of firms now expecting a recession.
March’s jobs report also disappointed, showing a net loss in employment and a rising unemployment rate.
National Bank, however, sees a “temporary pause to assess” as the more likely outcome, noting that while soft indicators are weakening, hard economic data haven’t yet deteriorated in a meaningful way. Still, if current trends continue, NBC believes the next cut could come as early as the June 4 meeting.
Scotiabank’s Derek Holt, meanwhile, lays out the case for disinflation, pointing to a cooling job market, weaker commodity prices, and ongoing economic slack. It also warns that Canada could feel the ripple effects of a slowing U.S. economy, especially with trade barriers making it harder for Canadian exports to find buyers.
Case for a hold: Inflation risks and a cautious BoC
Even with the economy showing signs of strain, both Desjardins and Scotiabank say the Bank of Canada may choose to hold off on another cut—for now.
Desjardins points out that while rates are still expected to head lower, just how far they fall will depend heavily on how trade policy evolves.
“The direction of travel for interest rates is still lower, but where the policy rate troughs will be highly conditional on where trade policy settles,” Desjardins economists wrote.
Scotiabank sees persistent inflation as the bigger risk. The Bank’s preferred core inflation measures have continued to run hotter than expected—between 3.5% and 4% month-over-month on a seasonally adjusted annualized basis.
“These core measures have been persistently too hot straight back to last May,” says Holt. “Their persistence has tended to suggest that the BoC shouldn’t have been easing as much as it has to date, so it’s time to call time out.”
Tariff-related price pressures could also continue to feed into inflation in the months ahead, making the Bank even more cautious about cutting prematurely.
The takeaway
Whether the Bank cuts rates on Wednesday or not, the easing cycle appears far from over.
Markets still expect another 25 to 50 basis points of cuts this year, and many economists believe the next move could come as soon as June—especially if the incoming data continue to weaken.
As Scotiabank points out, what the Bank says about inflation, growth, and trade-related risks may be just as impactful as the rate decision itself.
BoC policy rate forecasts from the Big 6 banks
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Last modified: April 15, 2025