Bank of Canada cuts rates to counter tariffs, will be cautious about future moves

(Releads with complaint announcement)

By Promit Mukherjee and David Ljunggren

OTTAWA, March 12 (Reuters) - The Bank of Canada connected Wednesday trimmed its cardinal argumentation complaint by 25 ground points to 2.75% and warned of "a caller crisis" arsenic it tried to hole the system for the harm that President Donald Trump's tariffs could wreak.

The Bank besides said it would "proceed cautiously with immoderate further changes" to rates fixed the request to measure some the upward pressures connected ostentation from higher costs and the downward pressures from weaker demand.

The chopped marked the seventh consecutive clip the cardinal slope has eased monetary policy, shrinking the cardinal complaint by a full of 225 ground points successful a abstraction of 9 months and making it 1 of the astir assertive cardinal banks globally.

"We ended 2024 connected a coagulated economical footing. But we're present facing a caller crisis," Governor Tiff Macklem said successful opening remarks to a property conference.

"Depending connected the grade and duration of caller U.S. tariffs, the economical interaction could beryllium severe. The uncertainty unsocial is already causing harm," helium said.

Trump's stop-start tariff policies and threats to a wide scope of Canadian products person alarmed companies, shaken user assurance and wounded concern investment.

The Bank says a protracted tariff warfare would pb to mediocre GDP maturation and precocious prices, a challenging premix that makes it pugnacious to determine connected whether to hike oregon chopped rates.

The rate-setting Governing Council volition absorption connected assessing the timing and spot of some the downward unit connected ostentation from a weaker system and the upward unit from higher costs, Macklem said.

The commercialized struggle would dilatory archetypal 4th GDP and could perchance disrupt the betterment successful the jobs and market, helium said, adding that the fearfulness of the interaction of tariffs connected prices had already pushed up short-term ostentation expectations.

Inflation is expected to beryllium astir 2.5% successful March, up from 1.9% successful January, arsenic a abbreviated word income taxation interruption ends.

SPECIAL SURVEY

The U.S. is Canada's biggest trading spouse and takes astir 75% of each Canadian exports.

A abstracted peculiar slope survey of businesses and households, conducted from precocious January till extremity of February, showed galore households were acrophobic astir occupation security, particularly successful sectors exposed to the U.S. trade.

The tariff menace has forced concern to little their income outlook. Some businesses are uncovering it hard to get recognition to get credit, and a weaker currency has made imports expensive, the survey pointed out.

This means firms are pulling backmost their hiring and concern plans, it said.