Interest rates 'still too high': What economists say about latest Bank of Canada move

financialpost.com:

The Bank of Canada cut its benchmark lending rate by 25 basis points to three per cent in a move that was widely expected by investors and economists, but what comes next is up in the air given the looming trade war with the United States.

It’s the sixth consecutive cut by the Bank of Canada in a trimming cycle that began last June when rates stood at five per cent, and drops it to just under the top end of its neutral range of 3.25 per cent.

Bank of Canada governor Tiff Macklem signalled in December while policymakers cut rates by 50 basis points that the new year would bring more of a wait-and-see approach.

That appears to be the case since the Bank of Canada statement accompanying its rate decision gave no clues about future rate decisions.

But Macklem’s way forward could be challenged by new U.S. President Donald Trump and the tariffs he has threatened to place on Canada as early as Feb. 1.

“A protracted trade conflict would most likely lead to weaker (gross domestic product) and higher prices in Canada,” policymakers said in a statement accompanying the rate decision.

Here’s where economists think the Bank of Canada goes from here on interest rates.

Unlike previous interest rate decisions, the Bank of Canada was silent on where it will go from here on rates, Stephen Brown, deputy chief North America economist at Capital Economics, said.

“Strikingly, in its policy statement, the (Bank of Canada) dropped the line from December that ‘we will be evaluating the need for further reductions in the policy rate one decision at a time’ and it was not replaced with anything resembling forward guidance,” he said in a note.

Brown said there could be two reasons to explain the change: one is that rates have fallen within the