OTTAWA, March 12 (Reuters) - The Bank of Canada considered leaving its key policy rate at 3% ahead of a scheduled announcement before concluding it needed to cut for the seventh consecutive time, Governor Tiff Macklem said in an interview on Wednesday.
The central bank trimmed its key policy rate by 25 basis points to 2.75% and raised concerns about inflationary pressures and weaker growth stemming from trade uncertainty and President Donald Trump's tariffs.
"We did discuss the option of staying at 3% as well as cutting to 2.75%," Macklem said, adding that one approach was to wait until the uncertainty around tariffs eased a bit.
However, since the bank felt that domestic demand was going to be impacted and inflation continued at be around 2%, "the most appropriate course of action was to cut the policy rate," he said.
The BoC expects Gross Domestic Product in the first quarter to not be too far off from its forecast of an annualized 2% but the impact of the trade war might be more prominent in the second quarter, Macklem said.
"I don't have a new forecast, but certainly in the near term, I expect, it will be weaker than what we forecast in January," he said about the GDP growth rate for Q2.
Trump's tariff policies and threats have already hurt investment plans of businesses and consumer spending patterns. Tariffs are expected to reduce economic growth, increase job losses and spike inflation in the coming quarters.
The U.S. imposed a 25% tariff on all steel and aluminum products on Wednesday and Canada retaliated with C$29.8 billion ($20.74 billion) of import duties on a wide array of goods from the U.S.
Macklem assured that while these fluctuating moves were making monetary policy more complicated, he is confident the bank would maintain price stability over time for Canadians.
"We can't let a tariff problem become an inflation problem," he said, but added he did not rule out unscheduled monetary policy intervention in case of a severe shock to the economy.
When asked on the bank's diversity policy, Macklem said the bank would not abandon it, after the U.S. Federal Reserve in January scrubbed a "Diversity and Inclusion" section from its website.
"Getting people with diverse perspectives, getting people that reflect the diversity of Canadians working at the Bank of Canada is good for the Bank of Canada," he said.He did not elaborate on the priorities of G7 meetings, which Canada is chairng this year, but said it
would be much more effective if all the countries worked together instead of attacking each other.
"Having the U.S. attack its allies with new trade, new tariffs, makes no sense to me," he said.
($1 = 1.4367 Canadian dollars)
Reporting by Promit Mukherjee and Caroline Stauffer; Editing by David Ljunggren and Stephen Coates
