Wed Mar 12 16:28:52 UTC 2025: ## Bank of Canada Cuts Rates Amidst US Tariff Uncertainty
**Ottawa, Canada** – The Bank of Canada (BoC) announced a 25-basis-point cut to its key interest rate, bringing it down to 2.75 percent. This marks the seventh consecutive rate cut in nine months, reflecting growing concerns over the economic impact of escalating trade tensions with the United States.
Governor Tiff Macklem cited President Trump’s tariffs and the resulting uncertainty as major factors influencing the decision. He highlighted the conflicting pressures on inflation: higher costs due to tariffs pushing prices up, and weaker demand leading to lower prices. The BoC stated it will proceed cautiously with future rate adjustments, carefully assessing these competing forces.
While inflation currently sits near the bank’s 2 percent target, it’s expected to reach 2.5 percent in March due to a temporary sales tax break ending. The ongoing trade war is predicted to slow first-quarter GDP growth and potentially disrupt the job market. A BoC survey revealed widespread business concerns about job security and decreased investment due to tariff uncertainty. Businesses are scaling back hiring and investment plans, and a weaker Canadian dollar is increasing import costs.
Macklem emphasized that monetary policy cannot completely counteract the effects of a trade war, but the BoC aims to prevent higher prices from spiraling into sustained inflation. The bank’s decision reflects a cautious approach, with markets assigning a roughly 45 percent probability to another 25-basis-point rate cut at the next announcement on April 16th. The Canadian dollar strengthened slightly following the announcement. The US, Canada’s largest trading partner, accounts for nearly 75 percent of Canadian exports, making the trade dispute particularly impactful on the Canadian economy.
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