Bank of Canada cuts interest rate to 2.75% as country faces 'new crisis' from tariffs

by Jenna Benchetrit · CBC News · Posted: Mar 12, 2025 6:47 AM PDT

The Bank of Canada has cut its overnight lending rate by 25 basis points to 2.75 per cent, it announced on Wednesday, as an ongoing trade war with the U.S. begins to strain the Canadian economy.

Explaining the decision in his opening remarks, Bank of Canada governor Tiff Macklem said the economy started the year strong, with solid GDP growth and inflation within its two per cent target.

But tariff uncertainty caused by the on-again, off-again trade war between Canada and the U.S. has weighed on business spending and hiring, and shaken consumer confidence, he said. Manufacturing businesses in particular have lowered their sales outlooks.

It's "against this backdrop" that the central bank decided to cut the rate by a quarter point, according to Macklem, though he added that a surge in exports ahead of the tariffs might offset a slowdown in growth.

"While it is still too early to see much impact of new tariffs on economic activity, our surveys suggest that threats of new tariffs and uncertainty about the Canada-U.S. trade relationship are already having a big impact on business and consumer intentions," he said during his Wednesday news conference.

It's the seventh consecutive cut the Bank has made since it started bringing rates down in June 2024.

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