The growing recession risks for Canada of the commercial war led by the United States will push the Bank of Canada to reduce interest rates at least twice more this year, some economists predict, although most economists said that policy formulators will leave them unchanged on Wednesday.
The surprise announcement of the president of the United States, last week, to put a 90 -day break in the so -called reciprocal tariffs, except for China, did little to alter pessimism in Canada’s economic perspectives while US taxes on cars, steel and aluminum remain in place.
Unpredictable commercial policy of the USA. Together with the increasingly severe dispute of Trump with the economy number 2 of the economy that China has increased the possibilities of a global economic recession and that Canada suffers, given that around 80 percent of its exports go to the United States.
Economists in the Reuters survey from April 7 to 11, taken amid the uncertainty of tariff policy, now expect the Canadian economy to grow 1.2 % and 1.1 percent this year and then, respectively, significantly, significantly 1.7 % and 1.6 percent predicted a month ago. A handful also predicted that the economy falls into the recession this year.
“We are looking for the Boc to pause at 2.75 percent in April, since it expects more clarity on the tariff impacts before facilitating even more,” said Andrew Kelvin, head of Canadian and global tariff strategy on TD Securities.
“The established commercial policies are sufficient to subtract a percentage point of Canadian growth,” Kelvin said. “As a deceleration in growth begins to establish itself, we hope that the Boc resume flexibility.”
The commercial war between the United States and China is expected to, with tariffs up to 145 percent, increase the prices around the world, and Canada will not be immune.
A little more than 60 percent of economists, 18 of 29, expected the bank to maintain its stable nights on April 16 with 2.75 percent. The other 11 predicted a reduction of 25 basic points.
However, just over half of the economists, 15 of 29, two more rates cuts predicted for the end of the third quarter as the fears of recession increase. That will take the rate to 2.25 percent, the lower extreme of 2.25 percent of the bank at 3.25 percent range for a “neutral” rate that does not stimulate or restrict growth.
There was no clear majority among economists where rates would be at the end of the year. Interest rate futures are currently setting a price of about 40 basic reductions points this year.
High recession risk
The recent weakness in the labor market and the worsening of business and the feeling of consumers have already increased alarm, and all but one of the 15 economists who answered an additional question said that the risk of a recession this year was high.
The Canada Bank reduced its key rate for a seventh consecutive time last month, to 2.75 percent, marking a total of 225 basic points of reductions since the beginning of June.
But the recent increase in inflation, which reached a maximum of eight months of 2.6 percent in February, well above the midpoint of the Canada Bank of one to three percent, puts the central bank in a difficult place.
The 16 economists said that American tariffs had negatively affected commercial feeling, with more than 60 percent saying that it was “very negative.”
It is predicted that inflation will average 2.4 percent and 2.1 percent in 2025 and 2026, respectively, compared to 2.2 % and 2.1 % predicted in March.
