A need to fuel faster growth and shield the economy from U.S. trade-policy uncertainty led senior Bank of Canada officials to agree on a quarter-point rate cut last month, according to minutes summarizing central bank deliberations.

U.S. President Donald Trump’s tariffs would push Canada’s economy into a recession and cause unemployment to surge, BMO’s chief economist said in a research note, likely pushing the Bank of Canada to cut its benchmark interest rate at its next six meetings through October.

Canada’s jobless rate has fallen for two consecutive months, as it dropped to 6.8 per cent in December from a recent peak of 6.9 per cent in November. Prior to that, the unemployment rate had been on a steady rise from a post-pandemic low of 4.6 per cent in July 2022.

Traders of Canadian short-term interest rates have begun to price in meaningful odds of an emergency cut by the Bank of Canada to blunt the economic impact of tariffs the US said will take effect Tuesday.

The Bank of Canada’s governing council members think Canada’s economy will be hurt more by a protracted trade war than that of the United States, according to minutes released by the central bank on Wednesday.

The potential for prolonged trade war with the United States weighed heavily on the Bank of Canada when it decided to cut its interest rate to three per cent last month.