The Bank of Canada is expected to keep interest rates steady at 2.75% in June 2025. Interest rates in Canada are likely to remain unchanged in June 2025. This article breaks down the reasons, history, and what the future might hold for your wallet.
As we head into the summer of 2025, all eyes are on the Bank of Canada (BoC). According to major analysts and recent economic indicators, the central bank is widely expected to keep its benchmark interest rate unchanged at 2.75% during its June 5 policy meeting. While this may not sound like a big deal, it carries weighty implications for homeowners, businesses, and anyone with a loan or savings account.
Why is the Bank of Canada Holding Rates Steady?
In Q1 of 2025, Canada’s economy grew by 2.2% on an annualized basis—stronger than many had predicted. A key reason was a sharp rise in exports, which spiked as businesses rushed to ship goods ahead of new U.S. tariffs set to begin later this year.
However, not all parts of the economy are thriving. Household spending and domestic consumption remain soft. Canadians are cautious, still dealing with higher prices and tighter budgets due to the interest rate hikes of 2022–2023.
Snapshot: Canada’s Key Economic Indicators (Q1 2025)
| Indicator | Value | Comment |
|---|---|---|
| GDP Growth (Annualized) | 2.2% | Stronger than expected |
| Interest Rate (BoC Rate) | 2.75% | Expected to stay steady |
| Inflation (Core CPI) | ~3% | At the upper BoC target limit |
| Unemployment Rate | 6.1% | Slight uptick from last quarter |
| Household Spending | Sluggish | Canadians remain cautious |
A Quick Look at the Interest Rate Timeline
Let’s understand where we are by looking back:
| Year | Policy Rate at Start | Major Events |
|---|---|---|
| 2022 | 0.25% | Start of rate hike cycle to tackle inflation |
| 2023 | 4.5% | Peak interest rate levels reached |
| 2024 | 3.5% | Gradual easing as inflation slowed |
| 2025 | 2.75% | Current rate; holding pattern continues |
This shows that while rates are lower than the peak in 2023, they are still much higher than the near-zero rates seen before 2022.
What It Means for Homeowners and Borrowers
If you have a variable-rate mortgage or a line of credit, this rate hold might bring some relief. There won’t be a spike in your monthly payments—for now. On the flip side, fixed-rate mortgage holders won’t see a drop in rates unless bond yields fall, which depends on global and domestic economic outlooks.
“We expect the BoC to remain on hold until they get a clearer picture on inflation,” says Doug Porter, BMO Chief Economist.
Will Rates Go Down in 2025?
Yes, possibly. A Reuters poll of economists suggests two rate cuts are likely before the end of 2025. That’s based on signs that the economy may slow down in the coming quarters, potentially even dipping into a mild recession.
| Forecast (by end of 2025) | Expected Value |
|---|---|
| Interest Rate | 2.25%–2.50% |
| Inflation | 2.0%–2.5% |
| GDP Growth | Slows to 0.5% |
The BoC is expected to cut rates only if inflation continues to cool and unemployment rises. It’s a tight balancing act.
What the Markets Are Saying
Markets have reacted modestly. The Canadian dollar strengthened slightly above 73 U.S. cents, suggesting investor confidence. Stocks in banking, real estate, and consumer sectors may benefit if rates begin to drop later in the year.
Expert Views
Here’s a roundup of what the major banks are predicting:
| Bank | June Rate Call | 2025 Outlook |
|---|---|---|
| BMO | Hold | 2 cuts later in year |
| TD | Hold | Possible late-year cut |
| CIBC | Hold | Cut in Q3 2025 |
| RBC | Hold | Watching inflation closely |
What Should Canadians Do?
Whether you’re a homeowner, investor, or just managing daily expenses, here are a few tips:
- Don’t panic if you’re on a variable rate; stability is expected for now.
- Lock in fixed rates if you believe rates will fall later—especially if renewal is over a year away.
- Budget cautiously, as even stable rates are higher than pre-2022 levels.
- Keep an eye on inflation, job market, and policy updates.
Final Thoughts: The Road Ahead
The Bank of Canada is walking a tightrope. It wants to support the economy but also keep inflation under control. With the next rate cut potentially months away, Canadians have a window to plan and prepare.
We’ll be watching the BoC’s next moves closely, especially in the July and October 2025 meetings. For now, a rate hold at 2.75% offers a bit of calm, but uncertainty remains.
Stay tuned, stay informed—and stay smart with your money.
