The trade spat put the Bank of Canada in a difficult position as tariffs will likely result in a hit to economic growth, but it could also lead to a flare in inflation
The Bank of Canada cut its benchmark interest rate by a quarter point to 2.75% to buffer the Canadian economy against the impact of U.S. tariffs. Governor Tiff Macklem cited risks to economic stability and inflation from the trade war. The decision followed a survey indicating Canadians plan to spend less due to job loss concerns and businesses are likely to pass on tariff costs to consumers, potentially fueling inflation. The Bank of Canada will proceed cautiously with future rate changes, aiming to manage both economic drag and price pressures.
