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US tariffs are significantly higher than they were at the start of 2025, and US trade policy remains unpredictable. Inflation is near 2%, although underlying price pressures have picked up. With uncertainty about US trade policy still high, the outlook for the Canadian economy remains clouded.

Canadian economic activity has slowed considerably because of the trade conflict but is showing signs of resilience. While inflation is close to 2%, underlying inflation has risen to about 2½%.

On Wednesday, July 30, 2025, the Bank of Canada will announce its decision on the target for the overnight rate. A press release will provide a brief explanation of the decision. The Bank will also publish its quarterly Monetary Policy Report (MPR) at the same time as the rate decision. 

Tariffs and trade uncertainty are expected to weigh on Canadian economic activity for some time. Inflation remains close to the 2% target over the scenario horizon.

Governor Tiff Macklem discusses the Monetary Policy Report and the key issues involved in the Governing Council’s deliberations about the monetary policy decision.

Global growth has slowed since the start of 2025 amid the ongoing shifts in US trade policy and the resulting uncertainty. Still, the global economy has remained resilient so far, even though US tariffs are at their highest levels in decades.

Considerable uncertainty surrounds the outlook for inflation. It is extremely difficult to predict how US trade policy will play out and how businesses, households and governments will react to a given level of tariffs. The outlook also faces risks that are not directly related to tariffs.

The Canadian Foreign Exchange Committee (CFEC) released today the results of its April 2025 semi-annual survey of foreign exchange volumes in Canada.

Tariffs and related uncertainty continue to weigh on firms, according to results from the Business Outlook Survey and the Business Leaders’ Pulse. While overall sales outlooks remain weak, outlooks for exports have recovered somewhat, with worst-case trade scenarios appearing less likely. Firms remain cautious in their hiring and investment plans. Some businesses reported cost pressures from tariffs, but competition and weak demand are constraining price pass-through to customers. In this context, firms’ short-term inflation expectations are lower than they were last quarter.

On Monday, July 21, 2025, the Bank of Canada will release the second quarter issues of the Business Outlook Survey and the Canadian Survey of Consumer Expectations.