Today, June 4, 2025, the BoC held its target for the overnight rate at 2.75%.

Today, June 4, 2025, the BoC held its target for the overnight rate at 2.75%.  The BoC has held its rate steady since March 12, 2025. Reasons for pause include:

· Uncertainty around U.S. tariffs is still high.

· Inflation is a mixed bag: Headline CPI dropped to 1.7% (helped by the end of the federal carbon tax), but core inflation rose to 2.3% — slightly hotter than expected.

· The economy is cooling but not collapsing — Q1 growth came in slightly better than forecast, but housing activity is down, unemployment is up (now 6.9%), and consumer confidence has dipped.

Furthermore, with rising expectations that GDP will contract this quarter and next, officially ushering in a recession, the BoC is still likely to deliver more cuts in 2025 but won’t rush into doing so prematurely. The BoC remains focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval and will support economic growth while ensuring inflation remains under control.  They're watching closely how global trade tension affects inflation and growth.  The BoC is concerned with balancing weaker demand (which usually lowers inflation) with rising costs from tariffs (which could push inflation up). 

What This Means for Mortgages & Housing:

· Variable-Rate Mortgages: No change today means payments remain the same.

· Fixed-Rate Mortgages: Fixed rates are market-driven and could fluctuate based on inflation and bond yields. 

· Bond yields have steadily increased again over May and have remained elevated as investors “remain wary of U.S.-backed debt” and this has put upward pressure on fixed rates.

· With inflation slightly firmer than expected, lenders may hold steady or tighten a bit.  

· The US 10-year bond yield needs to drop below 4% (currently 4.38%) before we can expect to see the Canadian bond yields drop and then flow through to lower fixed rates in Canada.

Bottom line: The Bank of Canada is hitting pause to see how things shake out. They're not making any sudden moves — they're being cautious and data-dependent. If inflation cools and trade tensions ease, we could see more rate relief ahead. But for now, it's a cautious holding pattern — and that means stability, not stimulus, for Canadian homeowners and buyers.