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TORONTO, March 12, 2025 (GLOBE NEWSWIRE) -- The Bank of Canada's decision to cut its key interest rate aims at softening the impact of an escalating trade war with the U.S. as the Canadian economy begins to falter from its strong footing at the start of 2025.
The trade uncertainty has spiked inflation expectations among consumers and businesses, just as inflation had started to stabilize around the Bank's target in recent months.
"Moving forward, the Bank of Canada will have to navigate carefully to ensure that weaker demand can sufficiently buffer the inflationary pressures of tariffs,” says CPA Canada's chief economist David-Alexandre Brassard. "Striking the balance between stimulating the economy while not contributing to inflation will be tricky. If we see reduced uncertainty from our main trading partner, it could reduce the pace of rate cuts.”
Given that 83 per cent of Canadians said they were already adjusting their financial plans in response to economic uncertainty in January, the current trade tensions could further dampen consumer spending.
Three-quarters (76%) of Canadians say the broader economic climate is affecting financial well-being, with one-third (34%) saying they are in worse financial shape than one year ago, according to a recent CPA Canada and BDO Debt Solutions survey.
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"If consumers reduce spending, businesses will see lower sales, which in turn reduces hiring and investment plans. These ongoing impacts, not yet fully captured by economic data, are exactly what the Bank of Canada is trying to mitigate,” says Brassard.
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