In his post-meeting press conference, Bank of Canada Governor Tiff Macklem stated that the Canadian economy ended 2024 in good shape, with inflation close to the 2% target. However, he noted that ongoing uncertainty from continuously changing U.S. tariff threats has shaken business and consumer confidence, impacting economic outlooks.
Macklem warned that the trade conflict with the U.S. is expected to weigh on economic activity while simultaneously driving prices and inflation higher. He added that, given the need to assess both the upward pressures on inflation from higher costs and the downward pressures from weaker demand, the BoC will proceed carefully with any further changes to its policy rate.
The official highlighted that the latest business and consumer surveys indicate tariff threats and uncertainty surrounding Canada-U.S. trade relations are already influencing spending and investment decisions, and this shift is expected to translate into a marked slowing in domestic demand in the first quarter. He also noted that inflation expectations have risen as Canadians anticipate higher prices.
While the full economic impact depends on the extent and duration of U.S. tariffs, Macklem cautioned that even the uncertainty is already causing harm. He stressed that monetary policy cannot fully offset the effects of a trade war, though the BoC will do what it can to support adjustments. The BoC's chief added that what his central bank can and must do is ensure that higher prices do not lead to sustained inflation.
He also noted that the Canadian central bank did not seriously consider a 50-basis-point rate cut, emphasising that hard economic data still looks good.