In a statement issued Wednesday morning, the Bank of Canada said coming into 2025, prior to tariffs, the Canadian economy was in “a solid position, with inflation close to the 2% target.”
And then along came tariffs.
“Heightened trade tensions and tariffs imposed by the United States will likely slow the pace of economic activity and increase inflationary pressures in Canada,” said the bank’s statement. “The economic outlook continues to be subject to more-than-usual uncertainty because of the rapidly evolving policy landscape.”
Despite the strong start to the year, the uncertainty created by on-again, off-again tariffs has curtailed consumer spending as well as plans by businesses to add staff, “Governing Council decided to reduce the policy rate by a further 25 basis points,” said the bank.”
The .25% cut is the seventh cut in a row by the bank, taking its overnight rate to 2.75%.
“Past cuts to interest rates have boosted economic activity, particularly consumption and housing,” said the bank. "However, economic growth in the first quarter of 2025 will likely slow as the intensifying trade conflict weighs on sentiment and activity.
