Bank of Canada Governor Macklem expects damage from tariffs hence today’s rate cut

March 12, 2025 at 08:14PM

Bank of Canada discussed pausing rates at 3% ahead of Wednesday’s announcement, Governor Tiff Macklem tells Reuters in an interview:

Argument for staying at 3% was that growth had been stronger than we expected; another was, why don’t we wait until U.S. trade and tariff policy are a little clearer.

But given we expect tariffs to cause economic weakness, and the fact inflation is close to 2%, we felt the most appropriate course of action was to cut by 25 bps.

Uncertainty is making monetary policy more complicated, but I am confident we will maintain price stability over time for Canadians.

Not ruling out an unscheduled rate move if something severe happens suddenly.

We don’t think the revision to Q1 growth will be that big; Q2 will most likely be weaker than we forecast in January.

Do expect there will be some spillover from uncertainty into the housing market.

We think monetary policy right now is very much in the neutral zone.

Diversity has served the Bank of Canada very well.

I bolded some of the above. That one on expecting economic weakness is not going to be relevant to Canda only. I’ve been wary of further rate cuts from central banks due to sticky inflation but I think the negative growth impacts are going to come to the front of mind of central bankers and incline them to keep cutting.

This article was written by Eamonn Sheridan at www.forexlive.com.