OTTAWA, Sept. 17 (Xinhua) -- Bank of Canada on Wednesday reduced its policy rate by 25 basis points to 2.5 percent.

The central bank said in a news release that with a weaker economy and less upside risk to inflation, its Governing Council judged that a reduction in the policy rate was appropriate to better balance the risks.

According to the release, Canada's GDP declined by about 1.5 percent in the second quarter, with tariffs and trade uncertainty weighing heavily on economic activity.

Exports fell by 27 percent in the second quarter, a sharp reversal from first-quarter gains when companies were rushing orders to get ahead of tariffs. In the months ahead, slow population growth and the weakness in the labour market will likely weigh on household spending, said the release.

The upward momentum in consumer Price Index (CPI) inflation seen earlier this year has dissipated on a monthly basis, the bank said. A broader range of indicators continue to suggest underlying inflation is running around 2.5 percent.

"The federal government's recent decision to remove most retaliatory tariffs on imported goods from the United States will mean less upward pressure on the prices of these goods going forward," said the release. ■