Bank of Canada will cut interest rates 2 to 3 more times by the summer, economists say

The Bank of Canada cut interest rates by 25 basis points to 2.75 per cent — the seventh consecutive reduction — as it finds itself grappling with uncertainty created by United States President Donald Trump’s tariff onslaught.

Policymakers have now cut by 225 basis points after rates reached a multi-decade high of five per cent in July 2023.

Here’s where economists think policymakers go from here on interest rates.

“A quarter-point rate cut from the Bank of Canada might only be a Band-Aid, but we don’t yet know the size of the economic wound that will be opened up by U.S. trade policy ahead,” Avery Shenfeld, chief economist at CIBC Capital Markets, said in a note.

The Bank of Canada likely would have held rates at three per cent at Wednesday’s meeting were it not for the economic chaos unleashed by the U.S. tariffs, he said. As it is, sliding consumer confidence and slowing business investment as well as the expectation that growth will slow in the first quarter have forced policymakers’ hands on rates.

Looking ahead, Shenfeld thinks growth, not inflation, will be the dominant economic theme. As such, he believes the central bank will cut rates two more times by June.

“That could be the trough if tariffs come down again, as we still hope will be the case,” he said.

The Bank of Canada warned that tariffs encourage inflation and so it needs to “guard against” that threat.

“This confirms that the bank is hesitant to commit to much more in the way of policy support and is a risk to our view that the bank will cut at each of the next three meetings,” Stephen Brown, deputy chief North America economist at Capital Economics Ltd., said in a note.

Despite the many risks tariffs pose to the economy, Bank of Canada governor Tiff