04:17 PM EST, 01/29/2025 (MT Newswires) -- The Toronto Stock Exchange rose for a second session on Wednesday, moving higher after the Bank of Canada as expected cut interest rates by 25 basis points but at the same time, but offered an uncertain outlook for its future actions in the face of tariff threats from the Trump Administration.

The S&P/TSX Composite Index closed up 53.85 points at 25,473.30 on Wednesday, recouping ground lost in Monday's sell off of tech issues. Among sectors today, Base Metals, up 1.43%, was the biggest gainer. Limiting gains are declines in Battery Metals, down 1.8% and Telecommunications, down 0.75%.

RBC noted the Bank of Canada may or may not cut in March, depending on how coming data evolves, and the outcome of U.S. Donald President Trump's threats to impose a 25% tariff on Canadian goods, as soon as Saturday, Feb. 1.

"But considering a more hawkish assessment (stable inflation, growth optimism, excess supply being absorbed starting in Q1, removal of phrase on evaluating need for future cuts), a March cut is a 50-50 chance in our opinion," RBC said, noting this is its lowest conviction on a BoC meeting since the first half of 2023. "Furthermore," RBC added, "the chance of substantial further cuts in 2025 has been reduced as the onus seems to have shifted from status quo justifying large cumulative cuts to the data softening/coming in below the BoC's forecasts to warrant large scale easing."

In a separate note, RBC chief economist Frances Donald said the focus of BoC commentary "had less to do with its current assessment of the Canadian economy and much more on how to navigate an economy that potentially gets significantly knocked off course by U.S. tariffs."

According to Donald, the BoC had a "good understanding (and confidence in) how the economy is currently travelling". With 200 bps of easing already in the pipeline, Canadian growth is low but slowly improving, the unemployment rate is near a peak, and inflation is now well within the BoC's target range. "We agree," Donald said, before adding: "Without any shocks, the central bank would likely continue to gradually ease towards, we think, 2% by year end, but in smaller magnitudes and at a slower pace than in 2024."

But, Donald noted, the BoC "isn't facing standard run-of-the-mill uncertainty" in its outlook. Both the Monetary Policy Report and Governor Tiff Macklem's communication took a very different tone this time around. She said, "If central banks use the idea that setting monetary policy in uncertain times is like walking around in a dark room and trying not to trip on furniture, the BoC could more appropriately be described as blindfolded with projectiles being thrown at it."

"Indeed," she added, "the BoC is fighting two particular demons that make its base case forecasts and current assessment of the state of affairs far less useful than usual. Instead, the value of their communication is in the clues they drop about how they might navigate the shocks ahead. We think most signs continue to point to further declines in interest rates, the magnitude and speed of which will be determined by the details of a potential U.S.-Canada trade conflict."

Meanwhile, Rosenberg Research noted the Fed stood pat on rates today as expected, but said with the "hawkish shift in the wording" within its press statement, the U.S. central bank strongly hinted that no more rate cuts are coming for a long time. "Perhaps a not-so-veiled message to President Trump," the research added.