Bank of Canada rate decision: Rates held at 2.75% as expected

• The market was pricing in a 26% chance of a cut
• Macklem said there was a ‘clear consensus’ to hold at this meeting
• Governing Council decided to hold the policy rate as we gain more information on US trade policy and its impacts
• April inflation excluding taxes was 2.3%, which was slightly stronger than expected
• The US administration has continued to increase and decrease various tariffs
• New trade actions are still being threatened. Uncertainty remains high
• Pull-forward of exports to the United States and inventory accumulation boosted domestic activity in Q1
• Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence
• Housing activity was down, driven by a sharp contraction in resales
• The economy is expected to be considerably weaker in the second quarter
• Governing Council is proceeding carefully

There is no real guidance in the statement but the second-last paragraph offers a strong indication of where they stand:

Governing Council is proceeding carefully, with particular attention to
the risks and uncertainties facing the Canadian economy. These include:
the extent to which higher US tariffs reduce demand for Canadian
exports; how much this spills over into business investment, employment
and household spending; how much and how quickly cost increases are
passed on to consumer prices; and how inflation expectations evolve.

Highlights from Macklem’s opening statement:

• Governing Council is proceeding carefully, with particular attention to the risks
• We decided to hold the policy rate unchanged as we continue to gain more information on US trade policy and its impacts
• The recent further increases in US tariffs on steel and aluminum underline the unpredictability of US trade policy
• So far, the US economy has proven resilient as domestic demand stayed relatively strong
• The labour market has weakened, with job losses concentrated in trade-intensive sectors
• businesses are generally telling us that they plan to scale back hiring
• The Bank will be watching measures of underlying inflation closely

That sounds like a dovish hold and this encapsulates it:

At this decision there was a clear consensus to hold policy unchanged
as we gain more information. We also discussed the path ahead for the
policy interest rate. Here, there was more diversity of views. On
balance, members thought there could be a need for a reduction in the
policy rate if the economy weakens in the face of continued US tariffs
and uncertainty, and cost pressures on inflation are contained.

Faced with unusual uncertainty, Governing Council is proceeding
carefully, with particular attention to the risks. This means we are
being less forward-looking than usual.

USD/CAD is largely unmoved on the headlines but pricing for a July cut is down 45% from 71% before the BOC. I would expect some loonie buyers to wade in but I’m also mulling over this report, which could be a major CAD tailwind.