Canadian Banks Expect Faster Rate Cuts Amid Trade War

Canada’s two largest banks suggest that interest rates could be reduced more quickly amid the trade war with the United States. The Royal Bank of Canada and the Bank of Montreal note that the economic impact of this trade conflict could compel the Bank of Canada to continue cutting rates.

Douglas Porter, chief economist at the Bank of Montreal, stated that the central bank is expected to reduce rates by 25 basis points at each of its next four meetings through July, potentially lowering the key interest rate to 2 percent.

Prior to the trade war, the banks had anticipated only two rate cuts, in April and July. However, with the ongoing tariffs, they now expect that the longer these measures remain in place, the higher the likelihood of additional rate cuts.

The Bank of Canada is scheduled to announce its next interest rate decision on Wednesday, March 12.