Bank of Canada Forecasts Permanent GDP Impact from Prolonged U.S. Trade War

During a recent Bank of Canada policy meeting, members expressed concerns over a prolonged trade dispute with the U.S. impacting the domestic GDP permanently. Despite the recent reduction in the key policy rate to 3%, concerns persist over potential tariffs by President Donald Trump and their detrimental effects on the economy. The threat of tariffs has led to rapid rate cuts aimed at supporting economic growth. The council anticipates challenges including higher inflation from possible retaliatory measures by Canada, potential capital flight, disrupted supply chains, and a weaker Canadian dollar. The council will closely monitor the real-time impact of tariffs on the economy, focusing on supply chains and inter-sector connections.