Bank of Canada cuts interest rate amid trade war

Amid Canada’s trade war with the U.S., the Bank of Canada announced another rate cut.

The Bank of Canada announced it reduced the target for the overnight rate to 2.75 per cent.

This follows the January rate cut to three per cent.

The Canadian economy entered 2025 in a solid position, with inflation close to the two per cent target and robust GDP growth, the Bank of Canada said in its statement Wednesday.

“However, heightened trade tensions and tariffs imposed by the United States will likely slow the pace of economic activity and increase inflationary pressures in Canada,” the statement read. “The economic outlook continues to be subject to more-than-usual uncertainty because of the rapidly evolving policy landscape.”

U.S. President Donald Trump’s 25 per cent tariffs on Canadian steel and aluminum are now in place.

The Bank warned that monetary policy cannot offset the impacts of a trade war.

“What it can and must do is ensure that higher prices do not lead to ongoing inflation,” the Bank said in the statement. “Governing Council will be carefully assessing the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.”

The next scheduled date for announcing the overnight rate target is April 16.

See the full statement here.