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Bank of Canada Expected to Lower Interest Rate as U.S. Tariff Threats Escalate

Economists predict a seventh consecutive rate cut to counter economic uncertainty caused by U.S.-Canada trade tensions.

A view shows a Bank of Canada building in Ottawa, Ontario, Canada December 11, 2024. REUTERS/Blair Gable
Bank of Canada Governor Tiff Macklem takes part in a news conference, after cutting key interest rate, in Ottawa, Ontario, Canada October 23, 2024. REUTERS/Blair Gable/File Photo
Bank of Canada Governor Tiff Macklem takes part in a press conference, after cutting key interest rate, in Ottawa, Ontario, Canada, January 29, 2025. REUTERS/Patrick Doyle/File Photo
Bank of Canada Governor Tiff Macklem takes part in a press conference, after cutting key interest rate, in Ottawa, Ontario, Canada, January 29, 2025. REUTERS/Patrick Doyle/File Photo

Overview

  • The Bank of Canada is widely anticipated to cut its benchmark interest rate by 25 basis points on Wednesday, bringing it to 2.75%.
  • This would mark the seventh consecutive rate reduction in response to economic risks stemming from U.S. tariff measures targeting Canadian imports.
  • President Donald Trump announced plans to double tariffs on Canadian steel and aluminum to 50%, adding pressure on the Canadian economy.
  • While Canada's fourth-quarter GDP growth exceeded expectations at an annualized 2.6%, economists warn that prolonged tariffs could lead to long-term structural damage to the economy.
  • Bank of Canada Governor Tiff Macklem has emphasized the need to support the economy, with economists suggesting further rate cuts could follow if trade uncertainties persist.