How U.S. tariff uncertainty weighed on Bank of Canada’s latest rate move

The Bank of Canada is growing more cautious about interest rate policy as U.S. President Donald Trump's tariffs take effect on the economy, according to the latest report.

Uncertainty about both the rapidly changing U.S. trade policy and the impact it’s having on the Canadian economy dominated discussion by the Bank of Canada governing council in the lead-up to its interest rate hold earlier this month.

The group also identified some key metrics for assessing the effect of tariffs on inflation as it makes monetary policy decisions, according to a summary of deliberations released on Wednesday about its April 16 decision.

The decision to keep the benchmark rate at 2.75 per cent came on the heels of U.S. President Donald Trump’s April 3 so-called “reciprocal” tariffs, which targeted a slew of countries and roiled markets.

Those were the latest in multiple rounds of tariffs, three of which — on non-CUSMA compliant goods, on steel and aluminum, and on the auto sector — have hit Canada since early March, spurring $60 billion in retaliatory counter-tariffs.

The governing council, headed by Bank of Canada Governor Tiff Macklem, ultimately opted to keep its powder dry, with some members arguing a rate cut could end up being premature if tariffs and counter-tariffs led to a rapid rise in inflation.

The council considered two options during its meeting: a quarter percentage-point cut or a hold.

Those arguing for a lower rate highlighted the need for timely action given interest rate cuts take time to work through the economy and noted the stock market turmoil increased concerns over a deeper U.S. recession.

“While there were differences in views, everyone agreed there was a great deal of uncertainty and the situation could change quickly,” the summary of deliberations said.