The Bank of Canada has reduced its key interest rate by 25 basis points to 2.75 percent, warning that the country faces a new crisis due to trade uncertainty and tariffs imposed by US President Donald Trump.
Governor Tiff Macklem stated that the bank will proceed carefully with any further changes to rates, considering both inflationary pressures from higher costs and downward pressures from weaker demand.
The cut marks the seventh consecutive time the central bank has eased monetary policy, shrinking the key rate by a total of 225 basis points in nine months. The decision comes after months of inflation sitting at or around its 2 percent target.
Macklem attributed the slowdown to Trump’s stop-start tariff policies and threats to Canadian products, which have alarmed companies, shaken consumer confidence, and hurt business investment. He warned that a protracted tariff war would lead to poor GDP growth and high prices.
The bank’s rate-setting Governing Council will focus on assessing the timing and strength of both downward pressure on inflation from a weaker economy and upward pressure from higher costs. The Canadian dollar has extended gains after the decision, trading stronger by 0.2 percent to 1.44 against the US dollar.
Source: https://www.aljazeera.com/economy/2025/3/12/bank-of-canada-cuts-interest-rates-warned-country-faces-new-crisis