Bank of Canada Cuts Interest Rate to 2.75% in Response to U.S. Tariffs

The central bank's seventh consecutive rate cut aims to counter economic uncertainty and inflationary pressures from escalating trade tensions.

The Bank of Canada reduced its benchmark interest rate by 25 basis points to 2.75%, marking its seventh consecutive rate cut in nine months.
Governor Tiff Macklem cited heightened uncertainty from U.S. tariffs, which are expected to slow economic growth and push inflation higher, as a key factor in the decision.
The Canadian economy ended 2024 with stronger-than-expected GDP growth of 2.6% in the fourth quarter, but consumer and business confidence have weakened due to trade tensions.
The central bank emphasized caution on future rate decisions, balancing the risks of higher inflation from tariffs with weaker demand from reduced spending and investment.
Analysts suggest the Bank of Canada may hold rates steady in the near term to assess the full impact of the trade conflict and avoid exacerbating economic volatility.