Bank of Canada Governor Tiff Macklem delivered a cautious but slightly optimistic speech, highlighting that progress toward a new Canada–U.S. trade deal could help ease inflationary pressures by potentially removing mutual tariffs.
He emphasized that until such a deal is finalized, both U.S.-imposed tariffs and Canada's retaliatory measures will continue to weigh on inflation and economic sentiment. Macklem noted that final domestic demand in Canada remained soft in Q1, and prolonged uncertainty could keep both consumers and businesses hesitant. While acknowledging that a rate cut might be warranted if the negative effects of tariffs deepen and inflationary pressures ease, he also warned that any persistent firmness in core inflation would make rate cuts more challenging. The central bank remains highly data-dependent, particularly monitoring signs of weakening in the U.S. labor market.
In reaction to the speech, USDCAD is trading slightly lower at 1.36746, down 0.10%, though it remains near recent highs within the key resistance zone.
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