The Bank of Canada considered keeping interest rates at 3% before ultimately deciding to cut them for the seventh consecutive time, Governor Tiff Macklem said in an interview. The central bank trimmed its key policy rate by 25 basis points to 2.75%, citing concerns about inflationary pressures and weaker growth due to trade uncertainty and President Donald Trump’s tariffs.
Macklem mentioned that the bank discussed waiting until tariff uncertainty eased before making a decision, but ultimately concluded that domestic demand would be impacted and inflation remained around 2%. The Bank of Canada now expects GDP growth in the first quarter to be near its forecast of an annualized 2%, but warned that the trade war might have a more significant impact on the second quarter.
The U.S. tariffs on steel and aluminum products have already hurt investment plans and consumer spending patterns, with Macklem stating that these moves will reduce economic growth, increase job losses, and spike inflation in coming quarters. Despite these challenges, Macklem expressed confidence in the bank’s ability to maintain price stability for Canadians.
“We can’t let a tariff problem become an inflation problem,” he said, adding that unscheduled monetary policy intervention may be necessary in case of a severe shock to the economy. The Bank of Canada has committed to maintaining its diversity policy, which was recently adopted by the U.S. Federal Reserve despite criticism.
Source: https://www.reuters.com/markets/bank-canada-considered-leaving-rates-unchanged-governor-tells-reuters-2025-03-13