Toronto: Bank of Canada Governor Tiff Macklem has issued a cautionary statement regarding the Canadian economy's impending transition due to deep structural changes influenced by US protectionism.

According to Anadolu Agency, Macklem emphasized in his speech on Thursday that these changes are not merely temporary fluctuations but are poised to significantly alter the economic landscape. He highlighted that while the transition might accelerate if trade uncertainties diminish and businesses proactively invest in new technologies, markets, and products, it could also become more challenging if trade tensions escalate or unforeseen economic shocks occur.

Macklem underscored the necessity for the central bank to differentiate between cyclical economic weaknesses and fundamental structural changes to prevent policy missteps, such as overstimulating demand. He warned that reducing interest rates to counteract structural weakness could inadvertently lead to inflation if the economy's productive capacity has decreased.

The central bank has maintained its key policy rate at 2.25% as it continues to evaluate these shifting economic conditions.