The Bank of Canada has cut its interest rate by a quarter point, citing an economy weakened by ongoing U.S. tariffs and trade uncertainty.

The prime interest rate now sits at 2.25 per cent.

Governor Tiff Macklem says it’s believed that the rate will help to keep inflation below the Bank of Canada’s 2 per cent benchmark target as weak economic growth is expected for the remainder of the year.

Macklem warns that the weakness currently experienced in the Canadian economy is more than a cyclical downturn.

“U.S. trade conflict has diminished Canada’s economic prospects” says Macklem. “The structural damage caused by tariffs is reducing the productive capacity of the economy and is adding costs. This limits the ability of monetary policy to boost demand while maintaining low inflation.”

He says for the first time since January and the start of the trade war with the U.S. the Bank of Canada is publishing a baseline outlook for economic growth and inflation rather than alternative scenarios. Macklem says after 6 months under U.S. trade tariffs the economic impacts are becoming clear.