Business Brief: Steady rates in uncertain times

Good morning. The Bank of Canada’s rate decision yesterday was relatively subdued. But Governor Tiff Macklem had plenty to say in his press conference – including on the U.S. dollar’s recent bout of weakness. That’s in focus today, along with a look at the strain on Canada’s furniture retailers.

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In focus

At least interest rates are predictable

I’m Matt Lundy, The Globe’s economics editor.

Uncertainty was the prevailing economic theme of 2025. Not much is changing this year.

The Bank of Canada’s interest-rate decision on Wednesday was light on drama, with the central bank holding its benchmark rate at 2.25 per cent – where it’s expected to be for the foreseeable future.

But Governor Tiff Macklem and his colleagues offered plenty of pointed remarks about the coming months, however hazy they look.

In Macklem’s opening statement, the word “uncertainty” appeared seven times, the most since April, when the U.S.-driven trade war went global. That’s not exactly a scientific breakdown, but in the world of central bank communications – where the addition or absence of certain words is closely parsed by investors – it’s a notable choice from Macklem and company.

“A widely expected hold, but the emphasis on uncertainty in the statement was prominent,” said Toronto-Dominion Bank senior economist Andrew Hencic in a note to clients.

Macklem flagged several risks to the outlook, from the review of the North American trade deal to various “geopolitical uncertainties” to the independence of the Federal Reserve, which faces a barrage of criticism from U.S. President Donald Trump.

Yesterday, the Fed also paused its interest-rate cuts, leaving its key rate unchanged at a range of 3.5 per cent to 3.75 per cent. The decision to stand pat will likely fuel further criticism from Trump, who has assailed chair Jerome Powell for not sharply cutting short-term rates. The President has suggested he is close to naming someone to replace Powell once his term as chair ends in May.

Macklem’s comments on the United States were particularly notable.

In a nod to Prime Minister Mark Carney’s recent speech in Davos, he said in a press conference Wednesday that “it’s pretty clear that the days of open, rules-based trade with the United States are over.” Macklem also said that recent U.S. dollar weakness was being driven by geopolitical and trade events, not the usual factors, such as interest-rate differentials and commodity prices.

“International investors, they still want exposure to U.S. equities,” he explained. “But that safe-haven role of the U.S. dollar has been dented. People don’t want as much exposure to the U.S. dollar.”

Measured against a basket of major currencies, the U.S. dollar has dropped by about 10 per cent over the past year, according to Bloomberg data. The greenback tumbled on Tuesday after Trump said he wasn’t concerned about the currency’s recent decline.

Taken together, Macklem’s comments show how the world is changing, even if rates are projected to hold steady for many months to come. But with so many risks on the horizon, the path for interest rates could easily shift.

Plus we’ll soon be getting a better sense of how the Canadian economy fared through the end of 2025. Statistics Canada will publish November international trade and GDP data today and tomorrow. January inflation numbers will be released on Feb. 16.

Charted

Slumping sofas

While the the Canadian real estate market struggles to regain momentum, a closely tied industry is feeling the strain: furniture retailers. Economists don’t expect a large real estate rebound any time soon, which is bad news for retailers that ride the boom-and-bust cycles of the housing market.

Quoted

A plan by U.S. Immigration and Customs Enforcement to purchase a warehouse property owned by Vancouver-based Jim Pattison Developments to use as a holding and processing centre has sparked opposition on both sides of the border. Canadians are planning boycotts of businesses tied to billionaire-philanthropist Jim Pattison, while residents in Virginia are planning protests.

Up next

More files we’re following

Chummy: Alberta Premier Danielle Smith said she and David Eby share “common ground” on plans to further expand the Trans Mountain pipeline and pledged to keep the B.C. Premier in the loop as she prepares to release a new pipeline proposal in June.

Crummy: Canada’s Food Inspection Agency is cutting more than 1,300 jobs, union says.

Travelling: British Prime Minister Keir Starmer has started his four-day trip to China aimed at repairing ties and boosting business.

Watching: We’ll be keeping our eyes on November data from Canada’s merchandise trade balance and Survey of Employment, Payrolls and Hours.

Earnings today: Apple Inc., Blackstone Inc., Brookfield Infrastructure Partners LP, Caterpillar Inc., Champion Iron Ltd., Lockheed Martin Corp., Mastercard Inc., Rogers Communications Inc., Southern Copper Corp., Visa Inc.

Morning update

Global markets rebounded, lifted by a surge in the price of oil and precious metals that cushioned a hit ‍from ​earnings-related jitters.

Wall Street futures were in positive territory, while TSX futures pointed higher.

Overseas, the pan-European STOXX 600 was up 0.32 per cent in morning trading. Britain’s FTSE 100 gained 0.53 per cent, Germany’s DAX dropped 1 per cent and France’s CAC 40 advanced 0.61 per cent.

In Asia, Japan’s Nikkei closed 0.03 per cent higher, while Hong Kong’s Hang Seng rose 0.51 per cent.

The Canadian dollar traded at 73.77 U.S. cents.