The Bank of Canada (BoC) made another 0.25 per cent cut to its key interest rate on Wednesday, March 12, bringing it to 2.75 per cent.
“The Canadian economy entered 2025 in a solid position, with inflation close to the 2 per cent 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,” officials said.
They noted that “the economic outlook continues to be subject to more-than-usual uncertainty because of the rapidly evolving policy landscape.”
“While economic growth has come in stronger than expected, the pervasive uncertainty created by continuously changing U.S. tariff threats is restraining consumers’ spending intentions and businesses’ plans to hire and invest. Against this background, and with inflation close to the 2 per cent target, the Governing Council decided to reduce the policy rate by a further 25 basis points.”
In January, the bank had brought the rate down from 3.25 per cent to 3 per cent.
The decision aligns with what industry experts had largely predicted with tariff tensions in mind.
Ratehub.ca’s mortgage expert, Penelope Graham, told us that the central bank will need adjust its target rate to counter the damage being done to the economy if tariffs persist against Canada “despite the inflation risks that come alongside a very accommodating rate.”
“While core inflation will continue to be a focus for the BoC, it may have to sacrifice keeping it at its two per cent target in the future if economic stimulus is needed,” she said.
Phil Soper, president and CEO of Royal LePage, added that “as the trade conflict between the U.S. and Canada intensifies, more aggressive rate cuts by the Bank of Canada are possible to stave off a potential recession.”
How this rate changes your mortgage payments
Here’s a hypothetical scenario using Ratehub.ca’s mortgage payment calculator and the average home price in Canada in January 2025 — $621,753 — per the Canadian Real Estate Organization (CREA).
You’re a homeowner who put a 10 per cent downpayment on a $670,064 home with a five-year variable rate of 4.20 per cent amortized over 25 years (total mortgage amount of $621,753). You have a monthly mortgage payment of $3,338.
With the Bank’s interest rate now at 2.75 per cent, your variable mortgage rate will decrease to 3.95 per cent, and your monthly payment will drop to $3,254.
This means you’ll pay $84 less per month, or $1,008 less per year, on your mortgage payments.
Upcoming Bank of Canada rate announcements
The next interest rate update will include a monetary policy report and commentary as well.
Keep an eye on the Bank of Canada website at 9:45 a.m. EDT on the following dates:
- Wednesday, April 16, 2025 (rate update, monetary policy report and commentary)
- Wednesday, June 4, 2025 (rate update only)
- Wednesday, July 30, 2025 (rate update, monetary policy report and commentary)
- Wednesday, September 17, 2025 (rate update only)
- Wednesday, October 29, 2025 (rate update, monetary policy report and commentary)
- Wednesday, December 10, 2025 (rate update only)
