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Buildings seen from Lake Ontario along the skyline of the city of Toronto, Ontario, Canada, on July 01, 2023.
Bank of Canada slashes interest rate, warns of tariffs
The Bank of Canada cut interest rates by half a point to 3.25% on Wednesday to kickstart some growth in the Canadian economy. Gov. Tiff Macklem indicated that further cuts would be more gradual.
Macklem said the outlook for the Canadian economy was uncertain, in part because President Donald Trump has threatened to impose tariffs on Canadian imports.
“If those things happen, they will have a big impact on the Canadian economy and will dramatically impact our forecast,” he said. “Let’s hope that does not happen.”
Bank of Nova Scotia economist Derek Holtsaid the rate cut was so steep that it seemed “like an apology note” after slowing the economy with earlier inflation-fighting increases.
Canada's economy has been shrinking on a per capita basis for six quarters, with most growth associated by an immigration-driven population increase. Figures released last Friday showed the unemployment rate rose to 6.8%, up from 6.5%.
But Macklem said Canada is not in a recession: “We’ve not seen widespread lay-offs or widespread job losses typically seen in a recession.”
Justin Trudeau welcomed the rate cut, clearly hoping to avoid more economic bad news while his Conservative opponents prosecute him as a hapless economic leader.