The bank of Canada reduces interest rates, warns the conflict in the ‘Našte’ trade | | Business and economy news
Governor Bank of Canada warned that the tariff war with the US would ‘badly harm economic activities in Canada.
The Canada Bank (BOC) reduced its key policy rate for 25 base points to 3 percent, reduced growth forecasts and warned the Canadians that the Tariff war launched by the United States could cause great economic damage.
“Long -term and widely founded trade conflict would badly inflict economic activity in Canada,” Governor Tiff Mackklem said in an introductory word at a press conference on Wednesday. The prospects for such a war is a darkening of economic appearance.
US President Donald Trump promises to impose a 25 percent of tariffs on all imports from Canada Saturday. Canada sends 75 percent of all exports of goods and services to the US.
If Canada and other nations have avenged retaliation of 25 percent of the US tariff, it could reduce Canadian growth by 2.5 percentage points in the first year, and another 1.5 percentage points in the second year, said the bank, noting that it was not Prognosis, but a hypothetical scenario.
On Wednesday, it was reduced for the sixth time in a row that the bank had reduced borrowing costs. The inflation was consistently remained around the middle of the target span of the bank 1-3 percent, but economic growth is still slow.
“With an inflation of about 2 percent and economics in surplus supply, the Governing Council has decided to reduce the rate of politics of another 25 base points to 3 percent,” Banka said.
The Canadian dollar reduced 0.3 percent to 1.44 compared to the US dollar after the decision.
A difficult situation
The monetary markets see more than 43 percent of the chance for another reduction of 25 points at the next Boc’s announcement of the Monetary Policy Decision on March 12th.
“The Canadian bank would be in difficult situations, but our opinion is to become more aggressive in terms of reduction of rates if it is [US tariffs] What we are facing, “said Doug Porter, the chief economist at BMO Capital Markets.
The challenge of the bank is that US tariffs can increase inflation – in theory, which encourages the need for higher rates – and will also reduce growth, which could mean more stimuli in the form of lower rates on paper.
“One tool – our interest rate of politics – we cannot lean at a weaker exit and more inflation,” Mackklem said. The bank, however, could help the economy adapt, especially since the inflation is low, he said.
The bank also announced that his quantitative tightening program, designed to exhaust excess liquidity he pumped into an economy during pandemic, ended up in March.
Boc, which was among the most aggressively the best central banks in the reduction of rates, reduced the outbreaks of economic growth in the country to 1.8 percent in 2025 with 2.1 percent scheduled in October. The economy will rise earlier by 1.8 percent earlier, earlier than 2.3 percent growth.
The central bank increased its forecast for inflation to 2.3 percent from 2.2 percent in 2025. And at 2.1 percent from 2 percent for 2026. Projections do not take into account possible US tariffs.
The Canadian economy was reduced by a population of six consecutive quarters, and most of the observed growth was supported by the population increase.
With the Federal Government New Ivici on immigrationCanada is likely to record a population drop of 0.2 percent in 2025 and 2026.
