07:27 AM EDT, 03/13/2025 (MT Newswires) -- The Bank of Canada cut its key interest rate again on Wednesday by 25 basis points to 2.75%, as expected, said Commerzank.

At the same time, the statement was very clear about the already visible effects of the trade war with the United States, wrote the bank in a note to clients.

Further rate cuts are no longer a foregone conclusion but depend on the combination of higher inflation and weaker growth that the tariffs are likely to trigger, stated Commerzbank. With Canada's real economy seemingly on the mend at the end of last year, the prospect of a trade war is probably not what central bankers had in mind.

Meanwhile, Canada's policy rate may have reached a range that is neither expansionary nor restrictive, added the bank. Given the uncertainties, further rate cuts are likely to be more "cautious."

Commerzbank expects the BoC to cut rates again in April, but then to pause. However, much will depend on how the trade war with the U.S. develops and whether the conflicting parties reach an agreement soon.

At the moment, Canada appears to be one of U.S. President Donald Trump's main opponents and the Canadian dollar (CAD or loonie) is suffering as a result, according to Commerzbank.

However, if Trump turns his attention to other countries, especially if reciprocal tariffs are imposed in early April, the CAD should gain relative to other currencies. Until then, those betting on a stronger CAD will have to wait for news from Trump, pointed out the bank.