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• Mar 17, 2025

It has become the recurring theme in the Canadian economy: the on-again, off-again trade war with the United States. And in the tradition of hoping for the best and preparing for the worst the Bank of Canada is using the one weapon it has, interest rate policy.

Last week the central bank trimmed its trend setting Policy Rate for the seventh straight time, dropping it another 25 basis-points to 2.75%. Even though the year started strong, with good GDP growth and inflation under control, the uncertainty swirling around American tariff threats has caused a chill in the economy.

“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,” Bank of Canada Governor Tiff Macklem said.

Macklem has also warned that the Bank cannot shield the Canadian economy from the financial impact of tariffs, but that it can use interest rates to manage a potential surge in inflation.

The chill in the broader economy is also being felt in the housing market. High hopes, mainly among sellers, have dropped as sales have dipped. Prices are also drifting lower in a number of bell weather markets.

On the positive side, buyers now have a wider selection of homes to choose from given the growth in new listings over the past several months. That, somewhat, better bargaining power might be enough to coax some reluctant house hunters back into the market.