The Bank of Canada has lowered its interest rate by 25 basis points again on Wednesday, bringing it down to 2.75%. This marks the seventh consecutive rate cut, reflecting the central bank’s efforts to support the Canadian economy amid escalating trade tensions with the United States.
Most economists had initially predicted the bank would pause its rate cuts in March due to signs of rising inflation, but many changed their forecasts after the United States launched its trade war with Canada.
While the economy had been poised for growth, ongoing uncertainty surrounding tariffs, driven by the fluctuating trade tensions between Canada and the U.S., has dampened business investment and hiring while also unsettling consumer confidence.
“In recent months, the pervasive uncertainty created by continuously changing U.S. tariff threats has shaken business and consumer confidence,” said Bank of Canada governor Tiff Macklem. “This is restraining household spending intentions and businesses’ plans to hire and invest.”
Citing the central bank’s survey results with businesses and consumers, Governor Macklem conveyed that business and household spending has shifted. Around 48 per cent of businesses surveyed plan to reduce their investment plans and 40 per cent plan to pull back on hiring, with just two per cent of businesses saying they will increase investment.
The central bank projects that a prolonged trade conflict could reduce Canada’s economic growth by three percent over the next two years. Additionally, it anticipates a 12 percent decline in domestic investment and an 8.5 percent drop in exports within the first year.
The Bank of Canada’s next scheduled date for announcing the overnight rate target is April 16, 2025.
The Manitoba Chambers of Commerce remains committed to supporting our members through these uncertain times, advocating for policies that promote economic stability and growth.
