Bank of Canada gave less weight to downward risks to inflation - minutes

By Promit Mukherjee and David Ljunggren

OTTAWA, March 26 (Reuters) - The Bank of Canada saw less evidence of downward pressure on inflation even as it decided to cut rates by 25 basis points on March 12, according to minutes of the deliberations released on Wednesday.

The bank trimmed its key policy rate for the seventh time in a row to 2.75% as a way to help Canadians deal with the uncertainty posed by U.S. tariffs, the minutes said.

As tariffs progressively take effect in Canada the bank says the economy is set to weaken, making it difficult to chart a course for monetary policy.

"Governing Council members were generally assigning less weight to downside risks to inflation," the minutes said, noting strong growth at the start of 2025.

"There was general agreement that the new data had shifted the balance, with somewhat less risk of lower inflation outcomes. They agreed that, in the absence of tariff threats and elevated uncertainty, the decision would probably have been to maintain the policy interest rate at 3%."

Macklem told Reuters on March 12 that some members of the governing council felt rates could stay at 3%.

Data released after the rate decision showed that inflation, which had stayed roughly at the bank's 2% target for five months in a row, spiked to 2.6% last month.

Members of the rate-setting council agreed that it was too early to see the impact of tariffs on economic activity, but that the shift in sentiment was likely to translate into a "considerable" slowing in domestic demand going forward.

They noted the extent and speed of the pass-through to consumer prices was uncertain and will require careful tracking.

The overall uncertainty means it would not be appropriate to provide guidance on the future path for the policy interest, the council concluded.

(Reuters Ottawa editorial)

Keywords: CANADA CENBANK/