Bank of Canada signals shift in how it sets rates amid tariff uncertainty

By Canadian Press on March 20, 2025.

OTTAWA — The head of the Bank of Canada is signalling a shift in how the central bank sets its key interest rate as trade uncertainty with the United States makes long-term forecasting much more difficult.

Tiff Macklem says that means monetary policymakers may be “acting quickly” when it comes to setting interest rates, rather than looking far into the horizon to stay “flexible and adaptable.”

Macklem is in Calgary today speaking to the city’s economic development group.

In prepared remarks, Macklem said the central bank is trying to set monetary policy that can cover a range of scenarios tied to Canada’s tariff battle with the U.S., rather than stick to one forecast and risk getting it wrong if the situation changes.

Tariffs have been imposed and changed multiple times so far this month, and it’s not fully clear what U.S. President Donald Trump’s plans are. The uncertainty is already having grave consequences for the Canadian economy.

The Bank of Canada cut its benchmark interest rate by a quarter-point to 2.75 per cent earlier this month, with its next decision set for April 16.

This report by The Canadian Press was first published March 20, 2025.

Craig Lord, The Canadian Press