Bank of Canada Cuts Rates to 2.75% Amid Tariff Turmoil

The Bank of Canada just dialed down its key interest rate to 2.75%, citing the escalating tariff showdown with the U.S. as a major headache for the Canadian economy. Governor Tiff Macklem explained that while growth looked steady at the start of the year, mounting uncertainty around trade barriers has chipped away at both business investment and consumer confidence. Even manufacturing and export-driven companies—once optimistic about higher demand—are pulling back on hiring and spending plans.

With inflation hovering near the Bank’s two per cent target, policymakers are in a tricky spot. Tariffs raise costs for Canadian importers, and the Canadian dollar’s relative weakness doesn’t help. Factor in supply-chain overhauls caused by the on-again, off-again trade standoff, and the result is a potential burst of price hikes that might erode consumer purchasing power. Macklem stressed that a rate cut can’t fully neutralize the harm from tariffs, but it may steady inflation if rising costs start trickling down to shoppers.

Still, the Bank stopped short of predicting a recession. Instead, Macklem and deputy governor Carolyn Rogers acknowledged that the economic picture remains murky, especially if tariffs linger or get worse. Some analysts predict more cuts could be on the way if things take a sharper turn. For now, the goal is to cushion Canadian businesses and families against disruptions, hoping that when the dust settles, stable inflation and stronger exports will help the country find its footing again.