{"id":14804,"date":"2025-01-29T16:41:30","date_gmt":"2025-01-29T16:41:30","guid":{"rendered":"http:\/\/torontotribune.ca\/index.php\/2025\/01\/29\/read-what-the-bank-of-canada-head-says-on-major-uncertainty-of-tariffs-national\/"},"modified":"2025-01-29T16:41:30","modified_gmt":"2025-01-29T16:41:30","slug":"read-what-the-bank-of-canada-head-says-on-major-uncertainty-of-tariffs-national","status":"publish","type":"post","link":"https:\/\/torontotribune.ca\/index.php\/2025\/01\/29\/read-what-the-bank-of-canada-head-says-on-major-uncertainty-of-tariffs-national\/","title":{"rendered":"Read what the Bank of Canada head says on \u2018major uncertainty\u2019 of tariffs – National"},"content":{"rendered":"


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The Bank of Canada<\/a> lowered its key interest rate<\/a> once again on Wednesday, cutting it by 25 basis points<\/a> to stand at three per cent.<\/p>\n

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The quarter-point drop is smaller than what the central bank delivered in its previous two interest rate decisions, where it cut the rate by 50 basis points each time.<\/p>\n

Bank of Canada governor Tiff Macklem<\/a>, in his remarks following the cut, said the move was part of its effort to restore price stability.<\/p>\n

But he also cautioned that proposed tariffs by U.S. President Donald Trump<\/a> create \u201cmajor uncertainty\u201d going forward.<\/p>\n

Here\u2019s what he had to say.<\/p>\n

Tiff Macklem: <\/strong>Good morning. I\u2019m pleased to be here with senior deputy governor Carolyn Rogers to discuss our policy decision and the Monetary Policy Report (MPR).<\/em><\/p>\n

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Today, we lowered the policy interest rate by 25 basis points. This is our sixth consecutive decrease and brings our policy rate to three per cent.<\/em><\/p>\n

We also announced our plan to complete the normalization of our balance sheet, ending quantitative tightening. The bank will restart asset purchases in early March, beginning gradually so that its balance sheet stabilizes this year and then begins to grow modestly in line with economic growth.<\/em><\/p>\n

We have three main messages this morning:<\/em><\/p>\n

First, inflation has been close to the two per cent target since last summer. Monetary policy has worked to restore price stability.<\/em><\/p>\n

Second, lower interest rates are boosting household spending, and economic activity is picking up.<\/em><\/p>\n

Third, the potential for a trade conflict triggered by new U.S. tariffs on Canadian exports is a major uncertainty. This could be very disruptive to the Canadian economy and is clouding the economic outlook.<\/em><\/p>\n

Since the scope and duration of a possible trade conflict are impossible to predict, the MPR projection we published today provides a baseline forecast in the absence of tariffs. We also provide some discussion of the potential consequences of a major trade conflict.<\/em><\/p>\n

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Let me expand on the first two messages before turning to the threat of tariffs.<\/em><\/p>\n

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First, inflation. A year ago, inflation was three per cent, short-term expectations were still elevated and inflationary pressures were broader than normal. <\/em><\/p>\n

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In recent months, inflation has remained close to two per cent, business and consumer expectations have largely normalized and there is no longer evidence of broad-based inflationary pressures. Shelter price inflation remains elevated, but it is gradually coming down.<\/em><\/p>\n

While we expect some volatility in CPI inflation due to temporary tax measures, our forecast is that inflation will remain close to the two per cent target over the next two years.<\/em><\/p>\n

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