Bank of Canada cuts interest rate once again as Trump's shadow looms over economy

The Bank of Canada has once again lowered its key interest rate.

It’s now down to 2.75 per cent.

That represents the seventh consecutive rate cut from Canada’s central bank.

The cut of 0.25 percentage points was widely expected amid grave uncertainty about the future of the world economy, much of it caused by the US’s newfound fondness for tariffs.

Canada has been repeatedly targeted by President Donald Trump, who has made clear his desire to weaken Canada economically so he can annex the country.

Economic analysts have warned Trump’s trade war could dampen growth and increase inflation.

Stock markets have plunged in recent days as fear spreads about the new president’s handling of the world’s largest economy.

In its commentary accompanying the rate announcement, the Bank of Canada said the country's economy "entered 2025 in a solid position," pointing to inflation data and "robust GDP growth."

But it added: "Heightened trade tensions and tariffs imposed by the United States will likely slow the pace of economic activity and increase inflationary pressures in Canada. The economic outlook continues to be subject to more-than-usual uncertainty because of the rapidly evolving policy landscape."

The Bank also said the US economy "looks to have slowed in recent months," adding: "Equity prices have fallen and bond yields have eased on market expectations of weaker North American growth."

Inflation in Canada is expected to increase, the Bank added, reaching about 2.5 per cent in March.

"Short-term inflation expectations have risen in light of fears about the impact of tariffs on prices," it said.

But it warned: "Monetary policy cannot offset the impacts of a trade war. What it can and must do is ensure that higher prices do not lead to ongoing inflation. Governing Council will be carefully assessing the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs."

The next rate announcement is due on April 16.