Bank of Canada Cuts Rates, Warns of Potential Damaging Impact of Tariff War

The Bank of Canada has decreased its key policy rate by 25 basis points to 3% and cautioned about the potential economic repercussions of a tariff war with the United States. The bank has revised down its growth forecast for Canada in 2025 to 1.8%, a decrease from 2.1%, while anticipating inflation to increase to 2.3%. Warning that a trade conflict could diminish Canadian growth by 2.5 percentage points if the United States implements a 25% tariff, the Bank of Canada emphasized the need for caution. The central bank's decision is viewed as a preventative step in anticipation of potential trade disputes, with expectations of additional rate reductions in the future.