A survey of 22 economists by Bloomberg suggests that the centreal bank will likely reduce its overnight rate to 3% during its first rate announcement of 2025.
Bank Governor Tiff Macklem is expected to address growing trade tensions and the upcoming provincial and federal elections as reasons for the anticipated rate cut while maintaining a cautious stance regarding further cuts this year. Royce Mendes, an economist at Desjardins, believes the rate reduction is justified, stating, “There are enough reasons to cut rates even without the tariff threat.” He pointed to factors like rising unemployment and slowing population growth as signs of a weakening economic outlook.
Should the U.S. impose broad tariffs on Canadian goods — potentially as early as February 1 — experts warn that this could push the Canadian economy into a recession, prompting the central bank to further stimulate the economy with additional rate cuts.
However, if Canada retaliates with its tariffs, the resulting price increases for Canadian consumers could force the Bank of Canada to reconsider its monetary policy, possibly pausing or even raising rates.
Mendes commented, “There’s reason to believe Donald Trump will follow through on his tariff threats against Canada,” adding that preemptively lowering the interest rate by a quarter-point would help soften the impact, starting from a less restrictive position on the economy.
In addition to the interest rate decision, the bank will also release its quarterly monetary policy report, offering updated forecasts on inflation and Canada’s economic growth.
The announcement is scheduled for 9:45 a.m., followed by a press conference at 10:30 a.m. with Macklem and senior deputy governor Carolyn Rogers.