The Bank of Canada is expected to lower its key interest rate by 25 basis points on Wednesday, as mounting trade tensions and political uncertainty weigh on the country’s economic outlook. With potential US tariffs on Canadian goods looming and both federal and provincial elections on the horizon,

The Bank of Canada cut its benchmark lending rate by 25 basis points to three per cent in a move that was widely expected by investors and economists, but what comes next is up in the air given the looming trade war with the United States.

The quarter-point reduction marks a step down from the Bank of Canada’s moves to cut by an oversized 50 basis points in its two previous decisions.

Bank of Canada governor Tiff Macklem said that there is not much central bankers can do to offset the economic consequences of a trade war with the U.S.

The Bank of Canada is likely to cut interest rates by a quarter percentage point on Wednesday as officials lay out their analysis of how US tariffs might derail a soft landing for the Canadian economy.

The Bank of Canada cut its policy interest rate by 25 basis points to three per cent on Wednesday, while warning that the economic consequences of a prolonged trade war with the United States could be severe, hindering growth while potentially reigniting inflation.

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.

Bank of Canada officials acknowledged the economic uncertainty created by a potential trade battle supported their decision to cut interest rates last month.

The Bank of Canada cut its key policy rate by 25 basis points on Wednesday, bringing it to three per cent. Here is the text of the central bank’s decision.