Monday Market Minute | Apr 14, 2025

BoC holds at 2.75% — Macklem signals patience amid trade fog

What Moved

The Bank of Canada held its policy rate at 2.75% on April 16, breaking its cutting streak. Macklem's statement described the trade environment as creating "exceptional uncertainty" that made it impossible to confidently forecast inflation or growth. The Monetary Policy Report revised GDP growth down to 1.2% for 2025, well below the October forecast of 2.1%. Markets initially sold off on the hold, then recovered as traders interpreted the pause as the BoC preserving ammunition for a potentially deeper slowdown.

Why It Matters

The hold created a paradox for private markets. The pause removed the tailwind of falling base rates that had supported private credit repricing and real estate affordability improvements. But the BoC's caution also signalled that it saw genuine downside risk — which validated the relative safety of private credit's secured, senior positions compared to equity exposure. For PE sponsors, the GDP revision was a warning to stress-test portfolio company revenue assumptions against a sub-2% growth environment.

Signal to Watch

The federal budget, expected in the coming weeks, would determine whether fiscal policy would step in where monetary policy was now hesitating.

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