Uncertainty over the impact of U.S. tariffs means the Bank of Canada could give a range of economic estimates rather than a single forecast when it presents projections next month, Governor Tiff Macklem said on Thursday.
The central bank is due to issue its quarterly monetary policy report on April 16, where it predicts growth in the quarters and years ahead.
But Macklem said the flip-flopping in U.S. trade policy has made it difficult for the BoC to nail down the assumptions or guideposts within which the Canadian economy will operate.
"If we were to prepare that monetary policy report today, I don't think it would have a single central projection," Macklem said during a press conference, saying that the BoC could instead publish a range of outcomes.
The BoC last changed how it presents forecasts five years ago, due to the COVID-19 pandemic.
The BoC would move back to the usual practise of forecasts when the uncertainty around tariffs lifts, he added.
The BoC said in its last monetary policy report that the economy was likely to grow at 1.8% in 2025 and by 2% in the first quarter of this year on an annualized basis.
But Macklem cautioned that he does not think "anybody in the governing council can have very high conviction about what the most likely outcome is."
Macklem said during his speech that the uncertainty over the effect of U.S. tariffs meant it had to change the way it conducted monetary policy to become less forward-looking than normal.
Macklem said that if the BoC guessed where the economy was going and made a mistake, its actions could be ineffective or make matters worse.
"So we need to set policy that minimizes the risk. That means being less forward-looking than normal until the situation is clearer," he told a business audience in Calgary, the heart of the oil-rich province of Alberta.
"And it may mean acting quickly when things crystallize. We need to be flexible and adaptable," he continued, without giving specific details.
Macklem reiterated that there could be no doubt about the BoC's commitment to low inflation, saying it had to ensure that higher prices from tariffs did not spread.
The unpredictability makes it unclear how much tariffs will dent demand and how much they will be passed on to consumer prices, Macklem said.
The more inflationary the impact, the more focus monetary policy has to put on anchoring inflation expectations, which risk drifting up when inflation rises more and more quickly.
The BoC aims to keep inflation at 2%, the mid-point of its 1-3% target range.
Macklem said inflation, which the bank managed to quell and bring it down to its target, was likely to rise.
"The Canadian economy managed a soft landing. Unfortunately, we're not going to stay on the tarmac for long. We now face a new economic crisis," he said.
