The Bank of Canada has lowered its key interest rate again to 2.75 per cent.
The 25 basis point reduction marks the seventh straight decrease by the central bank.
Governor Tiff Macklem said the economy entered 2025 in a solid position with inflation close to the two per cent target.
However, Macklem said the ongoing trade conflict with the United States is expected to increase prices and inflation.
“Depending on the extent and duration of new U.S. tariffs, the economic impact could be severe. The uncertainty alone is already causing harm,” Macklem told reporters on Wednesday.
Canadians are more worried about their job security and financial health due to the trade tensions and intend to spend more cautiously, he said.
Job security concerns have also increased, particularly among workers in export-oriented industries, including manufacturing, mining, and oil and gas.
Businesses have also lowered their sales outlooks, added Macklem, and business intentions to raise prices have increased as they cope with higher costs related to both uncertainty and tariffs.
“The recent shift in consumer and business intentions is expected to translate into a marked slowing in domestic demand in the first quarter of this year,” he said.
“If household and business spending intentions remain restrained, the combination of weaker exports and soft domestic demand would weigh further on economic activity in the second quarter.”
Macklem said the central bank will proceed carefully with any future changes to the policy rate.
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