With businesses cutting jobs, inflation rising, and consumer confidence collapsing, the BoC scrambles to contain the damage

The Bank of Canada just cut interest rates again, this time by 25 basis points, bringing the rate down to 2.75%. On the surface, that might sound like good news—lower rates usually mean cheaper borrowing, easier access to credit, and in theory, more money flowing into the economy. But let’s be clear about what’s actually happening here. The Canadian economy isn’t growing because of strong fundamentals or responsible fiscal policy. The Bank of Canada is slashing rates because the Trudeau—sorry, Carney—government has utterly mismanaged this country’s economic future. And now, with the U.S. slapping tariffs on Canadian goods and our government responding with knee-jerk retaliatory tariffs, the central bank is in full-blown damage control.

Governor Tiff Macklem didn’t mince words at his press conference. “The Canadian economy ended 2024 in good shape,” he insisted, before immediately admitting that “pervasive uncertainty created by continuously changing U.S. tariff threats have shaken business and consumer confidence.” In other words, the economy was doing fine—until reality set in. And that reality is simple: a trade war with our largest trading partner is economic suicide, yet the Canadian government has charged headlong into one.

Macklem tried to explain the Bank’s thinking. He pointed out that while inflation has remained close to the BoC’s 2% target, it’s expected to rise to 2.5% in March thanks to the expiry of a temporary GST holiday. That’s right—Canadians are about to get slammed with higher prices on top of already sky-high costs for groceries, gas, and basic necessities. But that’s not even the worst part. Macklem admitted that while inflation will go up, consumer spending and business investment are both set to drop as a result of this economic uncertainty. Businesses are pulling back on hiring. They’re delaying investment. They’re scared. And rightly so.

A BoC survey released alongside the rate decision shows that 40% of businesses plan to cut back on hiring, particularly in manufacturing, mining, and oil and gas—precisely the industries that were already hammered by Ottawa’s obsession with green energy and ESG policies. As Macklem put it, “Canadians are more worried about their job security and financial health as a result of trade tensions, and they intend to spend more cautiously.” In other words, this is self-inflicted. The government could have pursued a different approach. It could have worked with the U.S. to de-escalate trade tensions. Instead, Mark Carney—an unelected, Davos-approved globalist—is running the show, doubling down on tariffs that will raise prices for Canadians while doing absolutely nothing to change U.S. policy.

The worst part is that the Bank of Canada is completely cornered. It can’t provide forward guidance on future rate decisions because, as Macklem admitted, it has no idea what’s going to happen next. “We are focused on assessing the upward pressure on inflation from tariffs and a weaker dollar, and the downward pressure from weaker domestic demand,” he said. That’s central banker-speak for: We’re guessing, and we hope we don’t screw this up. And if inflation does spiral out of control, the BoC could be forced to raise rates instead of cutting them.

At the heart of this mess is a government that has spent years inflating the size of the state while crushing private sector growth. Macklem admitted that consumer and business confidence has been “sharply affected” by recent developments. That’s putting it mildly. The Canadian dollar has dropped nearly 5% since January, making everything imported from the U.S. more expensive. Meanwhile, Ottawa has responded to U.S. tariffs with a tit-for-tat strategy, placing nearly $30 billion in retaliatory tariffs on American goods. The BoC is now forced to clean up the wreckage, but it’s like trying to put out a fire with a garden hose.

And what about unemployment? Macklem dodged giving a direct forecast, but he didn’t exactly sound optimistic. “We expect the first quarter to be weaker,” he said. “If household demand, if business investment remains restrained in the second quarter, and you’ll likely see weakness in exports, you could see an even weaker second quarter.” That’s code for job losses. It’s already happening. The hiring freezes, the canceled investments—those translate into real layoffs, real pay cuts, real suffering for Canadian families.

Meanwhile, inflation expectations are rising. And once those expectations set in, they become nearly impossible to undo. Macklem was careful in his wording, but the meaning was clear: “Some prices are going to go up. We can’t change that. What we particularly don’t want to see is that first round of price increases have knock-on effects, causing other prices to go up… becoming generalized and ongoing inflation.” Translation: We know this is going to hurt Canadians, we just hope it doesn’t spiral out of control.

If this sounds familiar, that’s because it is. The same policymakers who told you that inflation was “transitory” in 2021 and then jacked up rates at record speed are now telling you that trade war-driven inflation will be “temporary.” But remember this: the BoC is only reacting to the mess created by politicians. The real blame lies with the people in charge. And now, that’s Mark Carney.

Macklem refused to comment on Carney’s role as prime minister, insisting that the BoC remains “independent” from politics. That’s cute. But the damage is already done. Ottawa picked a fight with the U.S. and now the BoC is left trying to prevent a full-scale economic downturn. The problem is, monetary policy can’t fix bad leadership. Canadians are the ones who will pay the price.