Bank of Canada slashes interest rates with another jumbo cut

Bank of Canada governor also said potential tariffs by Trump posed a ‘major new uncertainty’.

The Bank of Canada has slashed its key policy rate by 50 basis points to 3.25 percent and indicated further cuts would be more gradual, in a shift from previous messaging that continuous easing was needed to support growth.

On Wednesday, Bank of Canada Governor Tiff Macklem also said for the first time that the possibility the new administration of US President-elect Donald Trump might impose tariffs on Canadian exports represented “a major new uncertainty”.

The 50-basis-point cut, while widely expected, marks the first time since the pandemic that the central bank has implemented consecutive jumbo-sized cuts.

“With the policy rate now substantially lower, we anticipate a more gradual approach to monetary policy if the economy evolves broadly as expected,” Macklem said in opening remarks to a news conference.

The bank would be evaluating the need for further cuts one decision at a time, he said, noting that monetary policy no longer needed to be clearly in restrictive territory.