The Bank of Canada recently released a summary of its Governing Council's deliberations, which led to a monetary policy decision made on March 12, 2025. The discussions reflect the third stage of the central bank's policy decision-making process, following a series of briefings and recommendations received by the council members.

Commencing on March 7, 2025, the decision-making meetings were presided over by Governor Tiff Macklem and included Senior Deputy Governor Carolyn Rogers, alongside Deputy Governors Toni Gravelle, Sharon Kozicki, Nicolas Vincent, and Rhys Mendes.

During the discussions, the focus was initially on international economic developments. Members noted that economic growth in the United States slowed to 2.3% in the last quarter of 2024, with concerns that it may decelerate further. They also discussed moderate growth in the euro area, supported by potential increases in German borrowing for defense and infrastructure, and slower growth expected in China due to US tariffs.

The Canadian economy was reported to have entered 2025 robustly, with GDP growth reaching 2.6% in the fourth quarter of 2024, alongside solid household spending and business investment. However, trade tensions and tariffs are expected to disrupt a recovery in the labor market and impact business confidence, leading to a reduced pace of hiring and investment.

Inflation in Canada appeared stable at close to the 2% target since last summer, but uncertainties due to tariffs and weaker domestic demand posed challenges. Governing Council members discussed risks associated with growth and inflation, given trade tensions and uncertainty in the Canada-US trade relationship.

The policy decision reached was to reduce the policy interest rate by 25 basis points to 2.75%, a measure intended to help Canadians manage tariff-related uncertainties. Members noted, however, that the situation remains complex, and the balance between inflationary pressures from higher costs and weaker demand needs close monitoring.

In closing, Governing Council members agreed on the need to proceed carefully with future monetary policy adjustments as new data becomes available and further economic developments unfold. The impact of tariffs and retaliatory measures will be watched closely to prevent any spread of initial price increases to other goods and services.