Bank of Canada expected to cut interest rate on Wednesday as trade uncertainty with U.S. continues

The Bank of Canada is expected to cut its interest rate by 25 basis points on Wednesday, amid trade uncertainty with the United States.

The move would bring the policy rate to 2.75 per cent and mean a seventh consecutive cut to the central bank’s policy rate, which currently sits at three per cent, still near the top of the central bank’s neutral range of 2.25 to 3.25 per cent.

“There’s no harm in getting back to the mid-point of that range,” said Jeremy Kronick, vice-president of economic analysis and strategy at the C.D. Howe Institute. “Certainly, with this much uncertainty, I think there is a lot of value in signalling that support.”

During the last rate announcement in January, Bank of Canada governor Tiff Macklem said policymakers will have to balance the impact a tariff shock, which could lead to weaker economic growth, but higher inflation.

Economists say recent data suggest there would have been a case made for the bank to hold its rate on Wednesday, absent any trade conflict. Canada’s economy finished stronger than expected in the fourth quarter of 2024, growing at an annual pace of 2.6 per cent. Core CPI inflation also showed an uptick in January, suggesting underlying inflation remains on the higher side of the central bank’s inflation control band.

Following Friday’s jobs report, which showed the Canadian economy added just 1,100 jobs in February, market bets for a March cut by the central bank went above 80 per cent. The unemployment rate held steady at 6.6 per cent during the month.

“Unlike prior decisions though, easing will be less about absorbing already-accumulated economic slack and more about supporting an economy mired in trade conflict,” said National Bank of Canada economists Taylor Schleich,