With the economy doing better recently, the Bank of Canada’s decision to cut by 25bp today might have been a closer call were it not for the looming threat of tariffs. Admittedly, the Bank hinted that it might have to refrain from providing more policy support in the event of a full-blown trade war, as otherwise inflation could take off again. But with the government showing little appetite to retaliate to any US tariffs in full, we suspect that growth concerns would ultimately win out and the policy rate would end up lower.
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