The Bank of Canada's council acknowledged that protracted trade tensions with the U.S. may lead to lasting reductions in domestic GDP. Following a series of interest rate cuts, the bank reduced its key policy rate to three percent amid the uncertainty regarding U.S. tariffs on Canadian imports. Despite a temporary pause in tariffs, the threat of a 25 percent tariff on steel and aluminum looms. The minutes of the meeting indicate concerns that retaliation from Canada could increase inflation and slow economic growth further as the economy adjusts to these tariffs.
It was clear that a protracted trade conflict would lead to a decline in economic activity. The adverse impact on the level of GDP would be permanent.
The decision to cut rates by 25 basis points was influenced by the threat and uncertainty of tariffs, as well as by a desire to support growth.
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