Tariff-weary Canadians will learn whether the Bank of Canada’s next rate move is up, or down, or status quo on Wednesday. 

“The Bank of Canada must make its decision after weeks of market whiplash. While markets experienced a historic rally following Mr. Trump’s announcement that he would hold reciprocal tariffs on most nations for up to 90 days, the reality of permanent economic damage is setting in,” says Penelope Graham of Ratehub.ca.

“While Canada has largely dodged the worst of the tariff pain, the bank’s policymakers will be assessing the impact on our trade partners, and the effect at home."

"The central bank will also be weighing plummeting consumer and business sentiment, based on its own quarterly survey. A quarter-point rate cut is most likely next week, to help Canadians shore up amid this unprecedented economic backdrop.” 

A year ago, the bank’s rate was 5%, but as inflation eased, the bank initiated a series of cuts, taking the rate to 2.75% today. 

“The Bank of Canada is increasingly likely to cut its policy rate further,” TD Bank Director and Senior Economist James Orlando said in a press release.

“While pricing for April is still undecided, we think the bank should keep cutting by at least another 50 (basis points) over the coming months in order to cushion the blow from tariffs.” 

Canada was not included in Trump’s tariff pause but indicators are tariffs are having an effect, say RBC Senior Economist Claire Fan and Economist Carrie Freestone in a press release. 

“There are already signs that tariffs have begun to push up costs earlier in the production cycle,” say the RBC economists.  

Fan and Freestone add Wednesday’s decision from the bank will be another close call for policymakers, “but we expect (the bank) ultimately will opt to add another ‘insurance’ 25 basis point cut in the face of escalating US tariff risks.” 

“Expectations for recession have risen, with 32% of firms now operating under the assumption that Canada will enter an economic contraction over the next year,” said TD Bank Economist Maria Solovieva. “It means businesses and consumers are shifting into defensive mode.” 

“With Canadians scaling back spending, the Bank of Canada will be watching the inflation rate, and how that will impact its next announcement.” 

According to Orlando, the bank could announce a cut or a hold. 

“TD Economics’ forecast is that the central bank will make another cut of 25 basis points, but there is still a possibility it will hold its rate. Following the [federal government's] March jobs loss report, a cut is increasingly likely,” Orlando said. 

“There's a chance that the bank could pause its lending rate, but if it wanted to cut, there's ample reason for that decision, too. We're going to have to wait and see.” 

Extreme market volatility has caused large swings in bond yields, says Graham. 

“(At the same time) the Government of Canada five-year yield briefly touched a three-year low in the 2.4% range, that reversed mid-week when spooked investors turned their back on even traditionally safe-haven investments, causing a large sell-off,” she says. “While that activity has since stabilized, yields remain in the upper 2.7% range, which could put upward pressure on fixed mortgage rates.” 

Home buying across the country slowed in March in the face of the tariff announcements, says Graham. 

“The most recent real estate data shows deep hesitation among home buyers, with sales dropping by double-digit percentages,” she says.

"However, with Mr. Trump rolling back his most recent tariff threats, market sentiment may stabilize. Combined with slightly lower mortgage rates, that could lead to a pickup in activity, should buyer confidence return. However, this all hinges on how the trade war situation evolves, and whether the Canadian economic picture remains healthy.” 

A Bank of Canada rate cut would lower monthly mortgage payments, adds Graham. 

 “According to Ratehub.ca's mortgage payment calculator, a homeowner who put a 10% downpayment on a $668,097* home with a five-year variable rate of 3.95% amortized over 25 years (total mortgage amount of: $619,927) has a monthly mortgage payment of $3,244,” she says.

“If the Bank of Canada announces a 25-basis point rate decrease, their variable mortgage rate will decrease to 3.7% and their monthly payment will decrease to $3,161.” 

“This means that the homeowner will pay $83 less per month or $996 less per year on their mortgage payments.” 
 
*The average home price in Canada for February 2025 Canadian Real Estate Association)Economists

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SOURCE AND FOR MORE INFORMATION: Economists leaning towards a Bank of Canada rate cut; lower mortgage payments