Bank of Canada Maintains Interest Rate at 2.75%, Warns of Potential Recession Amid Trade War Concerns
The Bank of Canada has opted to keep its benchmark interest rate steady at 2.75%, signaling caution as global trade tensions escalate. In its latest policy announcement, the central bank emphasized growing concerns that the ongoing trade war between major economies could trigger a global economic downturn, potentially pushing Canada toward a recession.
The decision to maintain the current rate follows a series of hikes earlier this year as the central bank aimed to combat inflation. However, recent developments—including weaker global demand, fluctuating commodity prices, and heightened geopolitical uncertainty—have prompted policymakers to adopt a more measured approach.
In a statement accompanying the decision, the Bank of Canada noted that while domestic economic indicators such as employment and wage growth remain relatively strong, external risks are mounting. “The intensifying trade conflict between the United States and China is dampening business confidence, slowing global growth, and threatening to disrupt supply chains,” the bank said. “If these conditions persist, the Canadian economy could face significant headwinds that may lead to a recession.”
Economists had widely anticipated the hold on interest rates, particularly after recent data showed a decline in exports and a slowdown in consumer spending. The central bank also revised its growth forecast, trimming its expectations for GDP expansion over the next two quarters.
Despite holding rates steady for now, the Bank of Canada made it clear that it remains ready to respond should economic conditions deteriorate. “We are closely monitoring developments and stand prepared to adjust monetary policy as needed to support economic stability,” Governor Tiff Macklem said during a press conference.
This wait-and-see approach underscores the bank’s balancing act: maintaining inflation targets while safeguarding against an economic downturn triggered by global instability. With the threat of a prolonged trade war looming, businesses and consumers alike are being urged to remain cautious.
Financial analysts suggest that if the trade tensions persist or worsen, the Bank of Canada may be forced to cut interest rates in the coming months to stimulate growth and protect Canadian jobs. The central bank’s next policy announcement is scheduled for later this quarter, and markets will be watching closely for any signals of a shift in strategy.
Source : Swifteradio.com
