Wednesday March 12, 2025 | VICTORIA, BC [Posted at 6:50 am PT | Last update 4:39 pm]
by Mary P Brooke | Island Social Trends
CLICK HERE for March 12, 2025 Bank of Canada rate announcement livestream | Bank of Canada March 12, 2025 news release
The Bank of Canada has lowered their policy interest rate to 2.75%, down from 3.0%.
That’s a drop of 25 basis points.
This is the seventh consecutive drop in less than a year (the decline of rates began in June 2024).
Monetary policy cannot hold off the impacts of a tariff war, explained Bank of Canada Governor Tiff Macklem today. The Bank will try to prevent a resurgence of inflation using their one blunt tool of setting interest rates.
Tariffs are going to weaken the Canadian economy. Demand for Canadian exports will be weaker. Businesses are scaling back on hiring intentions, which could include layoffs, said Macklem in his response to media today.
Macklem outlined that the Canadian dollar is depreciating. Retaliatory tariffs add a charge to anything crossing the border. Businesses are looking for new markets, which entails costs. There could be supply chain problems. Businesses are holding more inventory which has a cost. All costs ultimately get passed onto consumers.
Domestic demand is expected to be quite weak, said Macklem.
“Monetary policy does need to be forward-looking,” saaid Macklem. “We will proceed carefully with any further changes to our key policy rate.”
Neutral:
“We do our best to estimate neutral,” said Macklem, with regard to where the interest rate should sit. The bank’s focus is “centered on 2.75%, which is where we are,” he told media today. He described 2.75% as “in that neutral range”.
News release notes:
“The Canadian economy entered 2025 in a solid position, with inflation close to the 2% target and robust GDP growth. However, heightened trade tensions and tariffs imposed by the United States will likely slow the pace of economic activity and increase inflationary pressures in Canada. The economic outlook continues to be subject to more-than-usual uncertainty because of the rapidly evolving policy landscape,” says the Bank of Canada in their March 12 news release.
“Inflation remains close to the 2% target. The temporary suspension of the GST/HST lowered some consumer prices, but January’s CPI was slightly firmer than expected at 1.9%. Inflation is expected to increase to about 2½% in March with the end of the tax break,” says the Bank of Canada today.
“The Bank’s preferred measures of core inflation remain above 2%, mainly because of the persistence of shelter price inflation. Short-term inflation expectations have risen in light of fears about the impact of tariffs on prices,” says the Bank of Canada today.
The Bank of Canada will address media about the increase: March 12, 2025 Bank of Canada rate announcement livestream
See the Island Social Trends editorial as to why it should have been dropped by 50 basis points to 2.50%: Businesses & consumers need significant interest rate drop March 12.
Inflation has been reduced:
The Bank’s goal to see inflation reduced has been achieved over the past few years with a rapid escalation in interest rates during 2022 and 2023.
The Bank of Canada interest rate remained at 5% from July 12, 2023 to June 5, 2024 but then was dropped five times in 2024, landing at 3.25% by 2024 year-end. In January 2025, there was a further drop by 25 basis points to 3.0%.
Not only was inflation stopped by the stiff rise in interest rates (in 2022 and 2023 and holding it there to June 2024) it pushed many small businesses and households into deeper economic distress. Larger business had put investment and debt-based expansion on hold.
Rate announcement dates in 2025:
The Bank of Canada 2025 schedule for policy interest rate announcements includes eight announcement dates:
- Wednesday, January 29 (lowered by 25 basis points to 3.0%)
- Wednesday, March 12 (Bank of Canada webcast)
- Wednesday, April 16
- Wednesday, June 4
- Wednesday, July 30
- Wednesday, September 17
- Wednesday, October 29
- Wednesday, December 10
Rates are announced at 9:45 am Eastern Time (6:45 am Pacific). Rates come into effect the day after the announcement.
The Monetary Policy Report is published concurrently with the January, April, July and October rate announcements.
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