Signals from the Bank of Canada (BoC) and the US Federal Reserve Board (Fed) were digested by the market yesterday. The BoC released official minutes from its policy meeting, and the Fed decided to hold rates steady. Each central bank considered the market environment under tariffs, inflationary pressure and geopolitical tensions.

• As widely expected, the Fed held firm. Fed policymakers kept the benchmark policy rate unchanged at the target range of 4.25% to 4.50% for the fourth meeting in a row. The Fed signalled that more information about the impact of tariffs was needed before committing to a rate change. Policymakers noted that market uncertainty had decreased.
• The Fed also maintained its projections. The central bank has been hesitant to lower rates until more clarity emerges about the scale, duration and effect of US tariffs. Policymakers forecast 50 basis points of rate cuts in 2025, matching the forecast from March. The Fed remains under pressure from US President Donald Trump to lower interest rates.
• The BoC’s deliberations reveal that a rate cut was considered. Minutes from the BoC’s last meeting showed that policymakers thought about making a rate cut two weeks ago. However, concerns about inflation and US tariffs impacting inflation data in the upcoming months were too strong. The BoC held its policy rate steady at 2.75%.
• US companies have added 124,000 jobs per month in 2025 so far. The average was 168,000 in 2024 and around 400,000 in 2023. The uncertain trade environment has made it difficult for businesses to make financial decisions.

Although US job growth has slowed, the number of people applying for unemployment benefits in the US fell to 245,000, which is around the historical low. Moderate inflation and fairly steady jobs data let the Fed adopt a wait-and-see approach as it remained open to rate cuts. Oil prices fluctuated as the geopolitical narrative in the Middle East evolved unpredictably and added complexity to the market environment.

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