The Bank of Canada's Governing Council has stated that recent U.S. policies on trade and foreign affairs, coupled with debates over the independence of the U.S. central bank, have contributed to a more turbulent global economic environment, heightening the uncertainty facing the Canadian economy. This assessment came from the summary of the January meeting deliberations, where the Bank decided to hold its key interest rate at 2.25% for the second consecutive time. The Council explained that the current environment is unusually unpredictable, making it difficult to assign clear weights to the risks surrounding growth and inflation forecasts. The Council noted that U.S. trade policies are increasingly being used for geopolitical objectives, which has increased market volatility and disrupted supply chains. It also pointed out that threats to the independence of the U.S. Federal Reserve have deepened tensions in global financial markets. In this context, the Bank stressed that the review of the United States-Mexico-Canada Agreement (USMCA) represents a significant risk that could affect investment decisions and capital flows. At the same time, any retaliatory tariffs or trade disruptions could lead to additional inflationary pressures. Bank of Canada Governor Tiff Macklem had previously indicated that the era of rules-based free trade with the United States has entered a different phase, emphasizing that monetary policymakers face an unprecedented challenge in balancing the risks of slowing growth against the risks of rising inflation. The Bank's stance reflects a clear caution in managing monetary policy, as it believes that a rapid move in any direction would be premature given the persistent ambiguity surrounding the global economy.

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