06:48 AM EDT, 03/13/2025 (MT Newswires) -- In a less volatile environment, low inflation and declining unemployment would have encouraged the Bank of Canada to pause and keep rates on hold on Wednesday, said Naoum Tabet, Fixed Income Investment Director at Capital Group Canada.

Canada's central bank decided to cut rates by 25bps on Wednesday.

Canada's economic growth is highly dependent on exports to -- and imports from -- the United States, noted Tabet. Uncertainty regarding future Canadian gross domestic product growth and a greater probability of a Canadian recession could potentially further deteriorate labor market conditions.

Although the BoC has been focused on the labor market and inflation, it cannot discount the risk of further Canadian dollar depreciation caused by the interest rate differential between the U.S. and Canada, stated the investment director at Capital Group. A weaker Canadian dollar over a longer period could see pressure on Canadian inflation.

Tabet expects short-term interest rates to "modestly" decrease and long-term interest rates to rise.