With the Bank of Canada’s next interest rate decision just around the corner on April 16, many Canadians are wondering whether borrowing costs—including mortgage rates—are about to drop again.
After cutting rates in March in response to growing trade threats, the Bank now appears more likely to pause next week. Here’s why:
What Changed Since the Last Cut?
In March, the Bank of Canada cut its policy rate by 0.25%, citing serious downside risks to the economy due to a looming trade war with the U.S. At the time, the threat of 25% tariffs on Canadian goods had the potential to push the country toward recession.
Since then, things have calmed down:
| Key Development | Economic Impact |
|---|---|
| US Trade Threats Eased | Tariffs on Canadian goods stayed relatively light—about 6% on average. |
| Tariffs on Other Countries Paused | Trump paused 90-day reciprocal tariffs on many “bad actor” countries (not including China), helping global markets stabilize. |
| TSX Rebounded | The Toronto Stock Exchange rallied 5.4% in response—though some gains have since reversed. |
These changes reduce the urgency for another rate cut, at least for now.
Why a Pause Makes Sense Right Now
While trade risks have eased, inflation is becoming harder to ignore. The Bank’s primary job is to control inflation, not directly protect against trade shocks. And inflation is proving sticky.
| Inflation Measure | 3-Month Annualized Rate |
|---|---|
| CPI-Trim & CPI-Median (avg) | 3.3% |
| CPI ex. food, energy & taxes | 5.4% |
The Bank has previously downplayed these inflation readings, blaming shelter prices, but many analysts now believe that excuse no longer holds water.
And even though sentiment and consumer spending have softened, the Bank has repeatedly said monetary policy can’t fix a trade war. Its job is to ensure inflation expectations stay anchored.
Could They Still Cut?
Yes—there’s still a chance.
Consumer and small business confidence have dropped sharply, and the Canadian dollar, while recently stabilizing at $0.71, was under pressure for much of the past month. If markets turn volatile again or economic indicators deteriorate in the days ahead, the Bank could decide to cut once more.
But with core inflation continuing to surpass expectations, the base case now is for a pause next week.
What This Means for Mortgage Rates
For mortgage borrowers:
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Fixed rates are influenced by bond yields, which recently bounced as market fears cooled. If the Bank holds steady, don’t expect dramatic moves in fixed rates right away.
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Variable rates, which move with the Bank’s policy rate, will likely stay where they are—at least until the next meeting in June.
That said, more rate cuts are still expected this year.
What’s Next for 2025?
Capital Economics now expects the Bank of Canada to cut rates at every other meeting until the policy rate hits 2.0%—down from the current 2.75%.
| Meeting Date | Expected Action |
|---|---|
| April 16 | Pause |
| June 4 | 0.25% Cut |
| July 30 | Pause |
| September 17 | 0.25% Cut |
If that plays out, we could see lower variable mortgage rates by late summer or fall. Fixed mortgage rates may also decline modestly—especially if bond yields fall further in response.
Bottom Line for Borrowers
The Bank of Canada is now expected to pause rate cuts next week, but the door remains open for more cuts this year. If you’re in a variable rate, don’t expect lower payments yet—but stay tuned.
If you’re in the market for a mortgage or up for renewal soon, it’s a great time to review your options. Fixed or variable? Short term or long? The right choice depends on your financial goals, and we’re here to help.
Have questions about how this affects you? Let’s talk.
