The Bank of Canada has lowered its key policy rate to 3 percent and cut growth forecasts due to increasing concerns over a potential tariff war with the US. Governor Tiff Macklem emphasized that such a trade conflict would seriously damage Canada's economic activity, impacting growth forecasts. The US's proposed 25 percent tariffs on Canadian imports could lead to significant drops in Canadian growth, illustrating the interconnectedness of the economies. Despite steady inflation rates, the BOC may consider further rate cuts to address these economic uncertainties.
A long-lasting and broad-based trade conflict would badly hurt economic activity in Canada, Governor Tiff Macklem warned, indicating the severity of potential US tariffs.
The Bank of Canada cut its key policy rate by 25 basis points to 3 percent amid concerns that US tariffs could severely dent Canadian economic growth.
A hypothetical scenario presented by the bank suggested that retaliatory tariffs could reduce Canadian growth by 2.5 percentage points in the first year.
With inflation steady at around 2 percent, the Bank of Canada is poised for more aggressive rate cuts if US tariffs materialize, according to analysts.
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