Bank of Canada has limited tools to mitigate trade war: Tiff Macklem [Video]

Bank of Canada governor Tiff Macklem says the central bank doesn’t have a lot of tools in its toolbox to mitigate the devastating effects tariffs would have on the economy.

In prepared remarks for a speech Friday, Macklem said if the U.S. imposes its threatened tariffs and Canada retaliates, Canadian economic growth would take a hit while inflation could also rise.

He said the Bank of Canada can help the economy adjust to a trade shock by lowering interest rates to help support consumer demand.

However, he added that the central bank can’t lower rates too much without risking adding fuel to the inflation fire.

The Bank of Canada has cut interest rates in quick succession over the past several months as inflation has moderated from its highs while the economy has stagnated.

The loonie has weakened in recent months as rates declined, and Macklem said that trend could continue …