08:20 AM EST, 01/30/2025 (MT Newswires) -- The Bank of Canada Wednesday cut its key interest rate by 25 basis points and removed the reference to future rate cuts from its statement, as expected, said Commerzbank.

At the same time, it lowered its growth forecast for the next two years to 1.8% year over year in both years from 2.1% in 2025 and 2.3% in 2026, but raised its inflation forecast for 2025 and 2026 by a tenth of a percentage point each, wrote the bank in a note to clients.

Higher inflation and lower growth aren't a good combination for the Canadian dollar (CAD or loonie) stated Commerzbank.

While there are mitigating factors -- lower growth is largely due to lower immigration rather than weaker productivity growth and inflation is still likely to remain very close to 2% -- these are unlikely to be enough to paint a more positive picture for the CAD in the coming weeks, pointed out the bank.

In addition, the BoC's focus is now clearly on potential United States tariffs, which -- if implemented -- will have a significant impact on the Canadian economy and are likely to lead to further losses for the CAD, according to Commerzbank.

As a result, the CAD is likely to remain under pressure until an agreement is reached with U.S. President Donald Trump, added the bank.