The Bank of Canada (BOC) has reduced its key policy rate by 25 basis points to 3 percent, lowered growth forecasts, and cautioned Canadians that a tariff war initiated by the United States could lead to significant economic damage, News.az reports citing foreign media.
“A long-lasting and broad-based trade conflict would badly hurt economic activity in Canada,” Governor Tiff Macklem said in opening remarks to a news conference on Wednesday. The prospect of such a war is clouding the economic outlook.US President Donald Trump is promising to impose a 25 percent tariff on all imports from Canada on Saturday. Canada sends 75 percent of all goods and services exports to the US.
If Canada and other nations slapped a retaliatory 25 percent tariff on the US, this could cut Canadian growth by 2.5 percentage points in the first year and another 1.5 percentage points in the second year, the bank said, noting that this was not a forecast but a hypothetical scenario.
Wednesday’s cut marked the sixth time in a row that the bank has reduced borrowing costs. Inflation has consistently stayed around the mid-point of the bank’s 1-3 percent target range but economic growth is still sluggish.
“With inflation around 2 percent and the economy in excess supply, Governing Council decided to reduce the policy rate a further 25 basis points to 3 percent,” the bank said in a statement.
The Canadian dollar was down 0.3 percent at 1.44 against the US dollar after the decision.
