Bank of Canada Reduces Key Interest Rate to 2.75% Amid Escalating Trade Tensions

Ottawa, March 12, 2025 – In response to escalating trade tensions and the recent implementation of U.S. tariffs, the Bank of Canada has announced a reduction in its key policy rate by 25 basis points, bringing it to 2.75%. This marks the seventh consecutive rate cut within a nine-month period, reflecting the central bank’s proactive stance in addressing emerging economic challenges. 

Governor Tiff Macklem highlighted the emergence of a “new crisis” precipitated by the U.S. administration’s decision to impose a 25% tariff on all steel and aluminum imports, effective immediately. In a reciprocal move, Canada has announced retaliatory tariffs totaling C$29.8 billion on U.S. goods, set to commence on March 13, 2025. 

The central bank expressed concerns that these trade conflicts could dampen economic growth, particularly in the first quarter, and potentially disrupt the ongoing recovery in the labor market. Inflation is anticipated to rise to approximately 2.5% in March, influenced by increased costs associated with the tariffs. 

Governor Macklem emphasized the bank’s cautious approach to future monetary policy adjustments, stating that any further changes to the interest rate will be carefully considered in light of both inflationary pressures and the potential for weakened demand. He underscored the institution’s commitment to maintaining price stability amidst these uncertainties. 

The Bank of Canada remains vigilant in monitoring the evolving economic landscape and stands ready to implement additional measures as necessary to support the nation’s economic well-being during this period of heightened trade tensions.