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Ottawa – Bank of Canada lowered its benchmark interest rate by a quarter on Wednesday as the tariff battle with the United States began to put pressure on the Canadian economy.
The policy interest rate reached 2.75% after the central bank’s seventh consecutive decline.
Economists generally expect this move.
Bank of Canada Governor Tiff Macklem said in a statement prepared on Wednesday that the stability of Canada’s economy is at risk in the trade war with the United States
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“The general uncertainty created by constantly changing the U.S. tariff threat has shocked business and consumer confidence,” he said.
“One uncertainty alone has caused harm.”
Macklem warned that economic losses could be “severe”, depending on how steep the tariffs are and how long they are retained. He said growth in the second quarter of 2025 will take a hit if the dispute continues.
U.S. President Donald Trump paid several weeks of tariff threats to Canada on March 4, although those import taxes have shifted with a series of adjustments, delays and reversals.
Wednesday is the next phase of Trump’s tariff agenda, imposing a 25% tariff on Canadian steel and aluminum imports
Bank of Canada’s latest interest rate announcements are combined with a supplementary survey of consumers and businesses and a supplementary survey of responses to the ghost of tariffs from late January to February.
These data suggest Canadians are planning to lose their jobs in trade disputes, especially in areas such as manufacturing, which are vulnerable to tariffs, especially in trade disputes.
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Nearly half of businesses also indicated in the survey that they would be ready to quickly transfer higher costs associated with tariffs to consumers, especially when they are transparent with consumers about price increases.
Bank of Canada notes that inflation expectations between businesses and consumers are rising, and if not subject to the organization’s way, this trend could lead to inflation itself.
McClum said the central bank will “carefully” with future interest rate changes, as it hurts both economic growth and the pressure on price increases associated with the trade war.
He said Canadian banks will adopt monetary policies to ensure that the price shock of tariffs does not turn into lasting inflation.
April 16 is the next interest rate decision date for the Bank of Canada, which will carry revised forecasts for the economy and inflation.
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