Bank of Canada again holds key interest rate at 2.75%, as tariff negotiations ‘are highly uncertain’

Back in April, the BoC spelled out two paths for Canada’s economy in lieu of its typical guidance. One of these envisioned a “severe” global trade war, causing a year-long recession.

While the level of severity today is debatable, multiple economists have called for a recession since the central bank’s last update. According to a Bloomberg survey of 34 economists between May 16 and May 21, Canada’s output is expected to shrink on an annualized basis in the second and third quarters of 2025, meeting the criteria for a technical recession.

Here’s a look at some of the economists using the “R-word.”

David Rosenberg, founder and president of Rosenberg Research

“There can really be little doubt that the Canadian economy has entered a recession, and the Bank of Canada would be well advised to move out of the dugout and onto the baseball field,” Rosenberg wrote in a May 29 editorial.

“While it seems a tad bizarre to sound so downbeat on the Canadian economy at a time when the equity market has tested all-time highs, make no mistake, the local macro backdrop is on very shaky ground.”

Beata Caranci, TD Bank chief economist

Last month, TD Bank upped its estimate for the effective rate of U.S. tariffs on Canadian goods to about 12 per cent, from roughly five per cent in March.

“This took our forecast from a technical recession to a formal one,” Caranci wrote in a report published on May 23.

“Prime Minister Carney has a daunting task in orchestrating an industrial revolution on the scale of a ‘war time effort,'” she added. “Canada is about to commence a grand experiment that will go far beyond any near-term trade dislocation currently being observed, making the Canadian economic outlook more uncertain than that south of the border.”

LJ Valencia, Desjardins economic analyst

“We expect current tariffs and ongoing threats to heighten trade volatility, heavily influencing growth and the decisions of Canadian central bankers,” Valencia wrote on May 6.

“Consequently, our latest [outlook] points to a mild recession in Canada in 2025, starting as early as Q2, as a result of falling exports to the U.S. combined with weak consumption and business investment.”

Jessica Hinds, Fitch Ratings director

“The close business ties between Canada and the U.S., developed over decades, have been called into question by the shift in U.S. trade policy, so it is no surprise that Canadian businesses are extremely concerned,” Hinds wrote on May 19.

Fitch forecasts Canada’s economy will suffer a recession in 2025.