Canada Bank's Big Cut for Two Consecutive Months... "Trump Tariffs, Significant Uncertainty"

Fifth Consecutive Interest Rate Cut... Most Aggressive Among Major Countries

On the 11th (local time), the Bank of Canada, Canada's central bank, implemented a 'big cut' (0.5 percentage point interest rate cut) for the second consecutive month. Over the past six months, it has aggressively pursued monetary easing policies among major countries by lowering interest rates five times in a row by a total of 175 basis points (1bp = 0.01 percentage points).

At its monetary policy meeting on the day, the Bank of Canada announced that it lowered the key overnight repo (repurchase agreement) rate from 3.75% to 3.25%, a 0.5 percentage point cut.

The Bank of Canada began its monetary easing cycle in June by lowering rates by 0.25 percentage points, followed by three consecutive monthly cuts of 0.25 percentage points in July and September. After cutting rates by 0.5 percentage points in October, it implemented another big cut this month.

Tiff Macklem, Governor of the Bank of Canada, stated that while a recession is not expected, growth is slowing more than anticipated. However, he forecasted gradual rate cuts starting next year.

At a press conference, Governor Macklem said, "With the key interest rate significantly lowered, if the economy generally moves as expected, a more gradual approach to monetary policy is anticipated."

Regarding tariff threats from U.S. President-elect Donald Trump, he described them as "a significant and new uncertainty."

Governor Macklem noted that the tariff threats "are already having some impact on data and are weighing on business investment," but it remains unclear whether the Trump administration will actually impose high tariffs or grant exemptions, or whether the Canadian government will retaliate.

Earlier, on the 25th of last month, President-elect Trump announced that if Canada fails to address issues related to illegal immigration, drugs, and trade deficits, a 25% tariff would be imposed on Canadian imports. In response, Canadian Prime Minister Justin Trudeau immediately visited Florida to meet with President-elect Trump. According to the U.S. Trade Representative (USTR), trade between Canada and the U.S. amounts to $1 trillion (approximately 1,430 trillion won). About 75% of Canada's total exports go to the U.S., making Canada's trade dependence on the U.S. absolute.