On June 4, 2025 the Bank of Canada did not lower interest rates, and it may have been one of the hardest decisions the bank has made. Everyone was waiting for cuts to lift a weak economy, which is not a strange thing to expect. The problem was that reports showed the other side of the story, inflation starting to show its teeth.
I am Moe Asgarian, a Toronto real estate broker, and I follow these decisions closely because the policy rate is still the single biggest input into what a buyer in this city can afford. Here is how the June 2025 decision came together, and what it meant for the market at the time.
A Decision Caught Between Inflation and a Weak Economy
This is why a lot of people described the Bank of Canada's position in June 2025 as a mission impossible. Everybody wants you to bring the rate down, and a low rate makes almost everything more expensive. In an economy whose condition was not good at all in mid 2025, inflation can create serious problems of its own. And that is only looking at the Canadian economy by itself.
Tariffs: The Pressure Coming From Outside the Border
In the first half of 2025, barely a week went by without something new arriving from across the border for the Canadian economy to deal with. On the Friday before the June 4, 2025 decision, President Trump announced that United States import tariffs on steel and aluminum would double, taking them to 50%. In a situation like that, you would normally expect the Bank of Canada to lower the rate to compensate, just to be sure the economy had some support under it.
Why First Quarter Growth Made the Hold Possible
Another statistic was published that same Friday, and it mattered. The Canadian economy grew by about 2.2% in the first quarter of 2025. The truth is that this was higher than expected, and the reason is simple. Companies with product sitting in their warehouses shipped everything they had, as fast as they could, so it would not be caught by the new tariffs. That is demand pulled forward rather than real strength, but it still arrived as a number above forecast, and the Bank of Canada decides on the numbers in front of it.
Business Confidence and the April 2025 Jobs Numbers
There is one thing worth knowing about the state of the Canadian economy as of June 2025, and reports including BMO's made the same point: confidence in Canadian businesses had fallen a long way. During the American presidential campaign I said that if Trump took office and started a tariff war, one of its important effects would be exactly this loss of confidence in Canadian business. When the future of an economy is unsettled, new investment stops, and that is true whether the investment is in housing or anywhere else that is supposed to pay a return year after year. Stopped investment is how a recession begins, and unfortunately the reports were showing that. On employment, which I review here most months, the April 2025 figures showed Canada lost 31,000 jobs in manufacturing and the unemployment rate reached 6.9%.
My Forecast: a 2% Policy Rate by the End of 2025
This tangle is why I say the Bank of Canada's decision in June 2025 was a genuinely impossible mission. The bank is supposed to decide on the basis of a handful of numbers, and those numbers do not agree with each other. Economic threats are everywhere, the labour market is in bad shape, and on the other side growth came in above expectations and there is real concern about inflation rising. My forecast, as of June 4, 2025, is that we probably finish 2025 with a policy rate of 2%. That means about three quarter point cuts across the meetings left in the year. It is the kind of call I like to come back to and review in a year end piece.
What the Hold Meant for the Toronto Housing Market
Interest rates are still one of the main forces setting the direction of the housing market. As of June 2025 a lot of buyers were waiting for rates to come down again before they entered. At the same time the weather in Toronto had turned, the market for showings and open houses was getting hotter, and in the house segment in particular we were starting to see multiple offer sales. The honest answer in early June 2025 was that you had to wait and watch what effect this decision would have on the market rather than claim to know it in advance.
If you want to know what the rate picture means for your own mortgage, purchase or sale in Toronto, fill out the form at the bottom of this page or book a free consultation with my team. Stay well and take care.
Frequently asked questions
Did the Bank of Canada cut interest rates in June 2025?
No. At its decision on June 4, 2025 the Bank of Canada left the policy rate unchanged. Inflation pressure was building at the same time as the economy was weakening, and holding was its answer to two sets of numbers pointing in opposite directions.
Why did Canada's economy grow in the first quarter of 2025 despite the trade war?
Growth came in at about 2.2% for the first quarter of 2025, higher than expected, because companies that had product sitting in warehouses exported everything they could as fast as they could to get ahead of the new tariffs. That is demand pulled forward rather than underlying strength.
What did the June 2025 rate hold mean for Toronto buyers and sellers?
As of June 2025 many buyers were still sitting out, waiting for rates to fall before entering the market. At the same time warmer weather had made showings and open houses busier in Toronto, and the detached house segment was starting to see multiple offer sales again.