Bank of Canada’s Macklem: US tariffs could roughly halve fourth-quarter growth to below 1%

Bank of Canada Governor Tiff Macklem warned that ongoing US tariffs could severely hinder Canadian economic momentum, potentially cutting fourth-quarter growth in half to below 1%. While noting that Canadian businesses have begun adapting to cross-border trade restrictions, Macklem highlighted significant downside risks to economic activity, alongside projections that domestic labor force growth will hover near zero over the next several years. Simultaneously, Macklem addressed inflation risks linked to energy markets, noting that sustained oil prices near $100 per barrel could drive headline inflation higher in the coming months. However, he emphasized that the central bank prefers to look through the initial shock of elevated fuel and refining costs rather than raising interest rates to restrain an already slowing economy. The policy stance remains cautiously balanced. While the Bank of Canada aims to avoid premature tightening, Macklem clarified that policymakers will monitor whether energy costs spill into broader goods and services, signaling readiness to react if second-round inflation pressures become persistent.