07:02 AM EST, 01/31/2025 (MT Newswires) -- The Bank of Canada cut the Overnight rate by 25bps to 3.0% on Wednesday and it also announced that quantitative tightening (QT) would end in early March, noted David Doyle, head of economics at Macquarie.

Forward guidance for further rate reductions was dropped. Governor Tiff Macklem stressed that this was due to trade policy uncertainty.

Much of the BoC policy statement was couched in terms of the United States tariff threat, noted Doyle.

The Monetary Policy Report baseline forecast didn't incorporate any U.S. tariffs but did provide illustrative scenarios on the potential impact,. These resulted in lower real gross domestic product growth and higher inflation, a combination that would complicate the BoC's policy path, stated Macquarie's economist.

In Macquarie's view, the BoC's baseline forecast is "overly optimistic" about the trajectory of real gross domestic product growth and the output gap. Doyle also believes there are downside risks to its core inflation forecast.

Macquarie expects three further successive cuts of 25bps ahead, with the overnight rate reaching 2.25% in June.