The Bank of Canada left its key overnight lending rate at 2.75 per cent Wednesday, but said if the economy sputters more than expected amidst a global trade war sparked by tariffs from U.S. President Donald Trump, it will consider cutting rates.
“With still high uncertainty, the Canadian economy showing some resilience, and ongoing pressures on underlying inflation, governing council decided to hold the policy interest rate unchanged,” the bank said in a press release accompanying its decision. “If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate.”
The overnight rate has been left alone since March 12.
The only economic certainty, the bank suggested, is more uncertainty.
“While some elements of U.S. trade policy have started to become more concrete in recent weeks, trade negotiations are fluid, threats of new sectoral tariffs continue, and U.S. trade actions remain unpredictable,” the bank said in its press release.
The bank also released its monetary policy report, a quarterly look at the Canadian and global economy.
The bank has left its key rate alone now for four straight meetings, after cutting it seven times in a row from its five per cent peak.
The bank began cutting last June amid concern over a sputtering Canadian economy.
That concern grew amidst a trade war sparked by Trump’s tariffs.
The theory is that by making it cheaper to borrow money, consumers and businesses will spend more, boosting the economy but also potentially pushing prices upwards.
