[ad_1]
\n<\/p>\n
OTTAWA \u2013 The Bank of Canada left its benchmark interest rate unchanged Wednesday as it waits to get a clearer picture of how global trade uncertainty is going to impact the Canadian economy.<\/p>\n
The central bank held its policy rate steady at 2.75 per cent, the first time it has left the key rate unchanged following seven consecutive cuts since June.<\/p>\n
That decision arrived in the midst of the United States\u2019 ever-shifting global trade war, and Bank of Canada governor Tiff Macklem made clear that the disruption from south of the border was the clear focus of Wednesday\u2019s decision.<\/p>\n
\u201cThe dramatic protectionist shift in U.S. trade policy and the chaotic delivery have increased uncertainty, roiled financial markets, diminished global growth prospects and raised inflation expectations,\u201d he said in prepared remarks.<\/p>\n
\u201cThe future is no clearer. We still do not know what tariffs will be imposed, whether they\u2019ll be reduced or escalated, or how long all of this will last.\u201d<\/p>\n
The Bank of Canada raises the policy rate when central bankers fear inflation could accelerate and lower it when policymakers want to stimulate growth in the economy.<\/p>\n
But both scenarios are in play right now amid what Macklem called \u201cconsiderable uncertainty\u201d tied to the United States\u2019 global tariff campaign.<\/p>\n
\u201cWe decided to hold our policy rate unchanged as we gain more inflation about both the path forward for U.S. tariffs and their impacts,\u201d Macklem said.<\/p>\n
The central bank issued a pair of economic forecasts alongside the rate decision.<\/p>\n
One sees the tariffs and threats negotiated away quickly and the economy stall, but escape with limited damage. Inflation would ease to 1.5 per cent for most of the year \u2013 mostly thanks to the elimination of the consumer carbon tax \u2013 before rising back to the central bank\u2019s two per cent target.<\/p>\n
The other forecast envisions a more protracted global trade war that sends Canada into a year-long recession.<\/p>\n
This scenario assumes the United States imposes tariffs of 12 per cent on all Canadian goods with a higher 25 per cent on motor vehicles and parts and another 25 per cent import tax applied globally; Canada also responds here with similar tariffs on a selection of U.S. goods.<\/p>\n
Canadian real gross domestic product contracts in this projection for four consecutive quarters, averaging declines of 1.2 per cent, and the U.S. tariffs \u201cpermanently reduce Canada\u2019s potential output and its standard of living,\u201d the forecast reads.<\/p>\n
That outcome also sees inflation rise higher, topping three per cent in 2026, and making the Bank of Canada\u2019s job that much harder.<\/p>\n
The central bank noted these two scenarios represent only a slice of the possible outcomes. But the governing council used this double-barreled framework to make its latest interest rate decision, attempting to set monetary policy that would best suit either outcome \u2013 in this case, a rate hold.<\/p>\n
The early tariffs and threats have already hurt business and consumer confidence in Canada, with some manufacturers laying off workers.<\/p>\n
Inflation meanwhile cooled to 2.3 per cent in March, in part thanks to falling gas prices and weaker travel demand to the U.S. amid the trade war.<\/p>\n
The Bank of Canada signaled it would \u201cproceed carefully\u201d in setting future rates and will be watching to see how much the tariffs reduce demand for Canadian exports, dampen spending from businesses and consumers, how quickly new costs are passed on to customers and how inflation expectations evolve.<\/p>\n
\u00a92025 The Canadian Press<\/strong><\/p>\n<\/p><\/div>\n