Sponsored by Rua Gold

Bank of Canada Cuts Rates to 2.75%

The Bank of Canada announced today a 25 basis point reduction in its target for the overnight rate, bringing it to 2.75%. This marks the seventh consecutive rate cut, as the central bank grapples with escalating trade tensions and tariffs imposed by the United State.

Despite a strong start to 2025, with inflation near the 2% target and robust GDP growth, the Canadian economy now faces significant headwinds. The Bank of Canada cited heightened trade tensions and U.S. tariffs as factors likely to slow economic activity and increase inflationary pressures.

The decision comes in the wake of U.S. President Donald Trump’s recent imposition of tariffs on Canadian goods, some of which were implemented last week. This trade conflict has injected uncertainty into the economic outlook, prompting the Bank of Canada to take preemptive action.

You can read more on the matter here.

What’s going on?

• US, Congo Explore Minerals-For-Security Deal As Rebels Advance (theDeepDive)

• Potash could replace oil exports as Canada's next card in a U.S. trade war (NP)

• Ukraine’s 30-Day Truce Hangs In The Balance (theDeepDive)

• Canada announces C$29.8 billion in retaliatory tariffs on US (Reuters)

• Ontario Blinks In Tariff Contest With US, Temporarily Suspends Energy Surcharge (theDeepDive)

• Europe retaliates against Trump’s tariffs, puts levies on American alcohol, motorcycles and meat exports (Globe)

• ‘Not Through Our Backyard’: Quebec’s Blanchet Rejects Pipeline Needed by Atlantic Canada (theDeepDive)

• US inflation fell more than expected to 2.8% in February (FT)

• Chainsaw To Scalpel: Trump’s Cabinet Clamps Down on Musk’s Government Makeover (theDeepDive)

• Ontario premier freezes plan to slap surcharge of electricity exports to US (Reuters)

• ‘Condo King’ Reveals Plan with Carney to Use CMHC for Foreign Rental Investments (theDeepDive)

What’s the latest?

• Cobalt: Cobalt hydroxide prices have surged 84% to $10.5 per pound since the Democratic Republic of Congo imposed a four-month export ban in February. Cobalt metal prices have also jumped over 43%, triggering supply concerns as Congo accounts for about 75% of global production. Telf AG has invoked force majeure, signaling potential delivery disruptions, while intermediate stocks outside Congo are estimated at 85,000 tons—about six months of consumption. The supply shock is already impacting battery manufacturers, with some halting price quotes amid rising costs.

• Inflation: U.S. inflation slowed to 2.8% in February from 3% in January, with core inflation dropping to 3.1%, its lowest level since April 2021. Grocery prices remained flat, but egg prices surged 10.4% in a month due to avian flu, reaching a record $4.95 per dozen. New tariffs, including a 25% duty on steel and aluminum, could keep inflation elevated, with economists estimating they could cost U.S. households up to $3,400 annually. Markets rebounded slightly after recent sell-offs, with the Nasdaq rising 1.5% and Tesla surging 8%.

• Bonds: Canada successfully sold $3.5 billion in five-year bonds at 11 basis points above U.S. Treasuries, showing investor confidence despite U.S. trade tensions. The country's low debt-to-GDP ratio provides fiscal space to absorb economic slowdowns, according to Manulife's Dominique Lapointe. With Mark Carney replacing Justin Trudeau as Liberal leader and no federal budget yet released, uncertainty remains, especially as U.S. tariffs threaten key industries. Despite potential risks, Canada maintains top credit ratings from S&P and Moody’s, unlike the U.S., which has a lower rating from S&P and Fitch.

• Northvolt: Swedish battery maker Northvolt AB filed for bankruptcy, ending its bid to lead Europe’s EV battery production. Despite $55 billion in contracts, the company struggled financially, with losses tripling to $1.03 billion in 2023 and a failed attempt at a $20 billion IPO. Major investors like Volkswagen and Goldman Sachs wrote down their stakes, while Sweden declined to provide financial aid. Northvolt’s Swedish operations will be sold, but its German and North American units remain unaffected as the EU debates its industrial policy.

• HOOPP: The Healthcare of Ontario Pension Plan (HOOPP) reported a 9.7% return for 2024, increasing net assets to $123 billion from $112.6 billion in 2023. Its public equities gained 17.9%, while private equity and infrastructure assets returned 12.7% and 12.3%, respectively. HOOPP adjusted pension liabilities for increased life expectancy and implemented benefit improvements for members. As of year-end, the fund held over $40 billion in government bonds.

Franco Nevada Q4 Earnings

The stock market and stuff

• J.P.Morgan cuts price target on Tesla shares, brokerage expects lower deliveries (Reuters)

• NexGen Receives Commission Hearing Dates For Rook I, While Local Indigenous Groups Issue Complaint Over Endless Delays From Feds (theDeepDive)

• Tesla bounces for second day after steepest drop since 2020 (CNBC)

In the juniors

• i-80 Gold Closes ATM Program After Raising $25.1 Million (theDeepDive)

• Simply Solventless To Acquire CanadaBis Capital For $0.116 A Share In All-Stock Deal (theDeepDive)

• Avino Reports “Record-Breaking” Q4 2024 Financials, Posts 95% Revenue Jump (theDeepDive)

FULL DISCLOSURE: Rua Gold is a client of Canacom Group, the parent company of The Deep Dive. The author has been compensated to cover Rua Gold on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.