Bank of Canada considers interest rate cut depending on Trump's policies

Jan 18 2017, 10:51 pm

The Bank of Canada could be lowering interest rates if Donald Trump’s possible protectionist trade measures negatively impact the Canadian economy.

On Wednesday, the Governor of the Bank of Canada Stephen Poloz said that there was “uncertainty” faced by financial forecasters and policy makers that remain undiminished.

“In our discussions, the Governing Council was particularly concerned about the ramifications of US trade policy because it is so fundamental to the Canadian economy,” Poloz said in a statement. “But we cannot capture these in our projections because they are simply unknown at this point.”

The Bank of Canada also announced Wednesday that it would be keeping its interest rate at 0.5%.

Poloz went on to say that there has not been that much change in the Canadian financial forecast since the Bank of Canada’s last set of financial projections in October 2016.

“Fundamentally, not much has changed since then. The forecast… is largely the same,” said Poloz.

But Poloz was said the biggest uncertainty in Canada’s economic future is the possible changes in trade policies that could be implemented by the new Trump administration.

“Most importantly what we have is heightened uncertainty about trade policies about trade policies. We identified a number of downside as well as upside risks in our projection,” said Poloz.

If the downside risks were to materialize and put Canada’s inflation target at risk, Poloz said there would be “room to manoeuvre” an interest rate cut.

Bank of Canada’s most recent Monetary Policy Report can be read here. 

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