Economic forecasts predict the Bank of Canada will decrease its key policy rate by 0.25 percentage points on Wednesday, reaching three percent. This move would follow two substantial rate reductions in October and December. The decision is influenced by recent inflation and job data, with Canada's annual inflation rate declining to 1.8 percent in December. Despite potential justifications for a rate pause, the looming threat of U.S. tariffs on Canadian goods is likely to prompt a modest cut.
TORONTO — Economic forecasts suggest the Bank of Canada will likely lower its key policy rate by a quarter of a percentage point on Wednesday in light of recent inflation and jobs data, bringing it down to three per cent.
"We don't really expect inflation to go back up, and they are squarely in the two per cent target right now, so it seems like the bank has enough room to have another cut." "The elephant in the room is the newly elected president south of the border, who has threatened again and again to slap a 25 per cent tariff on all Canadian imports," said the economist, noting such a move would cause GDP to fall around three per cent and trigger a recession.
The possibility of a trade war with the U.S. makes it unlikely the bank will extend its streak of cuts to seven when it makes its subsequent decision in March, said Nguyen.
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