Bank of Canada cuts interest rate, highlights risk of Trump's tariffs
Canada’s central bank lowered its key interest rate by half a percentage point while highlighting the risk of U.S. President-elect Donald Trump's threat of tariffs on all Canadian products
TORONTO — Canada’s central bank lowered its key interest rate by half a percentage point on Wednesday and called President-elect Donald Trump's threat to impose sweeping new tariffs on Canada “a major source of new uncertainty.”
The Bank of Canada's decision marked the fifth consecutive reduction since June and brings the central bank’s key rate down to 3.25%. Forecasters were widely expecting a big rate cut after the November labor force survey showed the unemployment rate rose to 6.8%.
Governor Tiff Macklem said in his prepared statement that the central bank opted for two large rate cuts in a row because inflation and economic growth don’t need to be restricted anymore. With inflation back at the 2% target, the central bank is now focused on keeping it there.
But the central bank noted a number of risks to the economy including Trump's 25% tariff threat.
“The possibility the incoming U.S. administration will impose new tariffs on Canadian exports to the United States has increased uncertainty and clouded the economic outlook,” the bank's statement said.
Trump has threatened to impose a 25% tax on all products entering the U.S. from Canada and Mexico unless they stem the flow of migrants and drugs.
“We did underline that the threat of new tariffs on Canadian exports, particularly at the level suggested, that is a major source of new uncertainty,” Macklem said at a press conference. “But the reality is we don't know if those tariffs are going to be implemented.
«We don't know if exemptions are going to be agreed on some parts,
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