Economists at TD Bank say the Bank of Canada is unlikely to stop its rate cutting cycle amid escalating trade risks that could weigh on economic growth.
updating its economic and financial outlook as the Bank of Canada looks to respond to various policy shifts from the incoming Donald Trump administration.after U.S. President-elect Trump pledged new tariffs on Monday. He said on his Truth Social media platform that he would introduce 25 per cent tariffs on all products from Canada and Mexico as well as an additional 10 per cent on all goods from China.
“The latter is edging out the odds, but the broad takeaway is that the BoC is unlikely to halt its rate-cutting cycle just yet, and particularly amidst escalating trade risks that are net negative for economic growth, despite a near-term inflation spike,” the report said. “This policy rate differential will keep a lid on the Canadian dollar. However, the near-term shifts in the loonie will be dominated by trade-talk. If president Trump follows through with punitive tariffs once officially in office, the loonie may revisit sub-70 U.S. cents levels, last sustained two decades ago,” the report said.
“Now, new risks are mounting with population growth set to stall amidst the threat of U.S.-imposed tariffs. This may be partly why the Ontario and federal governments unexpectedly flooded households with rebate cheques,” the report said.
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