By Nermeen Nabil Khear 
The Bank of Canada reduced its benchmark interest rate by 0.25 percentage points and removed guidance on future rate adjustments amid uncertainty caused by US President Donald Trump’s tariff threat.
On Wednesday, policymakers, led by Governor Tiff Macklem, lowered the overnight rate to 3%, as expected by markets and economists.
The bank said in its statement:
The economy is expected to strengthen gradually, and inflation will stay close to target. However, if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested.
Bank of Canada
Officials said the 200 basis points of rate deduction since June was substantial and dropped any guidance on further cutbacks. The latest reduction to 3% follows prior cutbacks that took place in October and December.
Canada braces for economic uncertainty amid US tariff threats
The US president had earlier threatened to raise tariffs on different countries, including Canada. The threat has taken a toll on Canada and is “clouding the economic outlook.” Trump has insisted on levying 25% tariffs starting Saturday. Canada has also promised to hit back.
Macklem pointed out that the fiscal blueprint has resolved prices to stability, yet a broad-based trade conflict would negatively affect economic activity. He, however, noted that the higher cost of goods “will put direct upward pressure on inflation.”
The fiscal expert warned that Canada can’t lean against a weaker output and raised inflation simultaneously. He added that the Central Bank would need to evaluate the trickling effect of inflation and compare it with the upward pressure on inflation from “higher input prices and supply chain disruptions.”
Canada expects slow economic growth in 2025 and 2026
The central bank’s fiscal strategy report set a minimum forecast for economic growth in 2025 because of the federal government’s lower immigration targets, among other things. The bank expects slower economic growth of 1.8% in 2025 and 2026, lower than the 2.1% and 2.3% that it had forecasted previously.
While the bank lowered its outlook for business investment and exports, it raised its expectations for consumer spending. Additionally, it plans to conclude quantitative tightening on March 5 and resume asset acquisitions to manage its balance sheet—a move previously confirmed by Deputy Governor Toni Gravelle.
Canada’s policy changed the deposit rates, setting them lower than the overnight rates from Thursday. The changes are geared to motivate the financial market players to settle balances and reserves.
According to the Central Bank of Canada, the difference in the interest rates has depreciated approximately 1% of the Canadian dollar since October.
Cryptopolitan Academy: How to Write a Web3 Resume That Lands Interviews – FREE Cheat Sheet
This articles is written by : Nermeen Nabil Khear Abdelmalak
All rights reserved to : USAGOLDMIES . www.usagoldmines.com
You can Enjoy surfing our website categories and read more content in many fields you may like .
Why USAGoldMines ?
USAGoldMines is a comprehensive website offering the latest in financial, crypto, and technical news. With specialized sections for each category, it provides readers with up-to-date market insights, investment trends, and technological advancements, making it a valuable resource for investors and enthusiasts in the fast-paced financial world.