06:32 AM EST, 01/31/2025 (MT Newswires) -- The Bank of Canada (BoC) slowed the pace of easing, delivering a 25bps cut at its policy meeting on Wednesday, in line with Nomura's expectation.

The opening statement omitted rate guidance as uncertainty from the threat of United States trade tariffs looms, noted the bank.

Tariff shocks were the highlight of the meeting, stated Nomura. The BoC revised its economic outlook and highlighted "severe risks" stemming from a potential trade conflict.

Governor Tiff Macklem's press conference was dovish, suggesting the BoC could opt to look through tariff-induced inflation. The governor further mentioned the persistence of excess supply in the economy, and a "soft" labor market as reasons for concern.

Even in the absence of tariffs, the bank believes the risks for inflation undershooting and economic growth remain skewed to the downside and maintains its call for two consecutive 25bps cuts in the upcoming meetings.

The BoC unexpectedly announced the end of quantitative tightening (QT) and stated it would restart asset purchases in early March, beginning gradually. This is relatively early compared to Nomura's expectation of QT ending in June, as Lynx settlement balances remain well above Deputy Governor Toni Gravelle's estimate of a "comfortable range."

The BoC lowered the deposit rate by 5bp below its policy interest rate, a technical adjustment to improve the effectiveness of monetary policy implementation. In addition, the BoC furnished operational details about its balance sheet policy.

The BoC is likely to commence repurchasing assets with the restart of the regular term repo program, followed by Government of Canada (GoC) T-bill purchases later in 2025. The BoC expects GoC bond purchases are likely to start towards the end of 2026 at the earliest, in line with Gravelle's remarks.