Bank of Canada Holds Rates: Inflation Keeps Cuts on Ice

In its fourth scheduled announcement of 2025, the Bank of Canada (BoC) has held the overnight lending rate steady for the second time in a row. Many had expected this to be the meeting where rate cuts would resume following April’s pause. But those hopes were dashed after a stronger-than-expected inflation report from Statistics Canada on May 20th.That single report sent bond yields soaring, prompting most lenders to hike their fixed mortgage rates before the week was out. And just like that, expectations for a June 4th rate cut were replaced with the assumption that the BoC would hold. That assumption was confirmed this morning: no rate cut.

Prime Rate Remains at 4.95%

For borrowers, this means the prime rate stays at 4.95%. It's worth clarifying that the Bank of Canada's overnight rate is what lenders use to set their prime rate. While this doesn’t have a direct impact on fixed mortgage rates, it affects variable rate mortgages and HELOCs (Home Equity Line of Credit). 

Fixed mortgage rates, on the other hand, are driven more by bond yields and investor sentiment. They often react independently from BoC decisions, which is exactly what happened in May when fixed rates jumped despite the central bank holding firm.

Insight From the Bank of Canada’s Announcement

In their official statement, the word "uncertainty" was used four times. BoC Governor Tiff Macklem used it eight times in his opening remarks. If the Bank itself is this uncertain, how can economists or analysts be confident in their predictions?

It’s why I always say: rate forecasts should be viewed the same way we view long-term weather forecasts—they’re always changing. The moment new data hits the table, the entire outlook can shift.

Key Comments from BoC Governor Tiff Macklem:

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All of this points to one clear takeaway: the BoC won’t move forward with additional cuts until they’re confident inflation is under control. As Macklem put it, “we are being less forward-looking than usual.”

What This Means for Borrowers

With so much market volatility, the question on everyone's mind is: What mortgage term should I choose right now?

A lot of Canadians are opting for 5-year fixed terms right now… not necessarily because it’s the best long-term move, but because it provides stability in an otherwise unpredictable environment.

That said, mortgages are never one-size-fits-all. As I explain in , what’s right for one borrower might be completely wrong for another. Your decision should reflect your own goals, risk tolerance, and future plans.

Final Thoughts

In a climate defined by unpredictability, one thing is certain: making the right mortgage move requires more than just watching headlines. While the Bank of Canada hit pause again, the direction of future rates depends heavily on inflation, tariffs, and global events, many of which are impossible to predict with precision.

That’s why now, more than ever, sound mortgage advice matters.

Whether you’re considering a fixed or variable rate, renewing your mortgage, or exploring your first purchase, don’t make the decision alone. At PMT Mortgage, our job is to cut through the confusion and help you make the choice that aligns with your goals, not the banks’.

Let’s talk about what’s right for you—not what’s trending.

Connect with one of our expert account managers today and let’s build a mortgage strategy that’s as smart as it is personal. Because in times of uncertainty, clarity is power.