Macklem Cautions on Canada's Economic Growth Amid Trade Tensions

Bank of Canada Governor Tiff Macklem sounded a cautionary note on Monday about Canada's economic growth, which he warned could be cut in half to below one percent if new US tariffs remain in place. Speaking before the Halifax Partnership, Macklem highlighted two key developments that are shifting the risks to growth and inflation: re-escalating trade tensions between Canada and the United States, and the persistent conflict in the Middle East.

Macklem noted that while Canadian businesses and households have been adapting to structural forces such as artificial intelligence and demographic changes, these new uncertainties pose a significant threat. He emphasized that if oil prices stay near $100 a barrel, inflation is likely to edge up in the coming months.

The Governor also stated that the Bank of Canada does not want to raise interest rates too quickly, which could restrain growth if inflationary pressures are contained. However, he warned that they will be too slow to respond if these pressures become more persistent.