08:15 AM EDT, 03/18/2025 (MT Newswires) -- The Bank of Canada cut its policy rate by 25 basis points to 2.75% last week, but Governor Tiff Macklem warned of "a new crisis" where "monetary policy cannot offset the impacts of a trade war," noted TD.

This is because sustained tariffs risk lifting inflation, threatening the BoC's hard-won 2% target, said the bank. This limits how far the BoC can cut rates to support demand.

As long as the pressure on tariffs remains in place, the BoC should keep its dovish bias, and TD expects two more quarter-point cuts to take the overnight rate to 2.25% by June.

Although markets are currently pricing in only a 50% chance of a cut next month, added the bank.