OTTAWA, April 16 (Xinhua) -- The Bank of Canada decided on Wednesday to maintain its policy rate at 2.75 percent.

The major shift in U.S. trade policy and the unpredictability of tariffs have increased uncertainty, diminished prospects for economic growth, and raised inflation expectations, the bank said in a statement.

"The path for U.S. trade policy remains highly unpredictable. There is also considerable uncertainty about the impacts of a trade war on our economy," said bank Governor Tiff Macklem.

According to the April Monetary Policy Report, there are two scenarios that explore different paths for U.S. trade policy: first, uncertainty is high, but tariffs are limited in scope. Canadian growth weakens temporarily and inflation remains around the 2 percent target. Second, a protracted trade war causes Canada's economy to fall into recession this year and inflation rises temporarily above 3 percent next year.

In Canada, the economy is slowing as tariff announcements and uncertainty pull down consumer and business confidence. Consumption, residential investment and business spending all look to have weakened in the first quarter, said the statement.

Trade tensions are also disrupting recovery in the labor market. Employment declined in March and businesses are reporting plans to slow their hiring. Wage growth continues to show signs of moderation, it added. Enditem

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