Canada Bank reduced the main policy rate by 25 basis points to 2.75 % on Wednesday, cautiously of the economic risks of the US tariff.
The central bank said it will continue with caution with more prices because it balances inflation pressure from high costs against poor demand.
The seventh consecutive rate of mitigation in a row in the past nine months, up to the total reduction to 225 basis points. The governor of Canada Bank, Tif Maclim, said that the economy ended in 2024 in full swing, but is now facing a new crisis.
“Based on the extent and duration of the new American definitions, the economic influence may be severe. He said in a press conference:” Understanding alone causes harm. “
President Donald Trump imposed a 25 % tariff on all steel and aluminum imports on Wednesday, which led Canada to announce $ 29.8 billion (20.68 billion dollars) in the reprisal tariff, valid on Thursday. The Central Bank has warned that the prolonged trade dispute can weaken GDP growth with consumer prices, which complicates monetary policy decisions.
Maclim said that the ruling council will monitor how the declining pressure from the weakest economy and the rising pressure affects the high costs of inflation.
The commercial conflict is expected to slow the gross growth growth in the first quarter and may affect the restoration of the labor market. The inflation is expected to reach 2.5 % in March, an increase of 1.9 % in January, with the expiration of the temporary sales tax break.
Fears about definitions have already pushed the short -term inflation forecast up to the top.
The Canadian dollar is strengthened by 0.20 % to 1.4403 against the US dollar, or 69.43 US cents, after the price decision. The return on government bonds for two years decreased 0.8 basis points to 2.521 %.
Market analysts estimated a 45 % chance to reduce the average rate of 25 Basis in the next policy declaration of Canada Bank on April 16.
A special survey of the central bank, which was conducted from late January to February, indicated increasing concerns about job security, especially in the industries exposed to US trade. Companies have reduced sales expectations, faced credit challenges, delayed employment and investment due to the weakest currency and high import costs.
Macklem stated that monetary policy cannot compensate for the full impact of the trade war, but it must ensure that there are no higher prices that do not lead to continuous inflation.
