Canada's central bank reduced its benchmark interest rate by 25 basis points to 3 percent on Wednesday, responding to heightened economic uncertainty resulting from potential US tariffs.
Alongside the decision to cut its target for the overnight rate, the Bank of Canada warned in an outlook report about \"more-than-usual uncertainty\" due to a rapidly evolving policy landscape, particularly the threat of trade tariffs by the new US administration.
The central bank also cut its growth outlook for 2025 and 2026.
\"In the absence of new tariffs, growth is forecast to strengthen, and inflation remains close to 2 percent. But the threat of new tariffs is causing major uncertainty,\" the central bank wrote in its report.
Despite a recent meeting with US Secretary of State Marco Rubio where discussions were described as \"positive,\" Canadian Foreign Minister Mélanie Joly said it remains unclear whether the proposed tariffs will be implemented this coming weekend. Canada is ready to retaliate if necessary, Joly told the press in a briefing streamed on Global News.
Last week, US President Donald Trump signaled he would still proceed with a 25 percent tariff on all Canadian imports starting February 1, reported CNN. However, the White House has yet to issue a statement to confirm those tariff rates.
The possible implementation of US tariffs on Canadian goods has raised concerns among business professionals and investors. Economists warn that such tariffs could have significant impacts on both economies, potentially disrupting trade flows and affecting jobs.
Academics and researchers are closely monitoring the situation, analyzing the potential long-term effects on North American economic relations.
The situation also holds implications for global markets, as increased trade tensions between major economies can influence international investment and economic stability.
Reference(s):
cgtn.com
