Bank of Canada Concerned Over Fresh US Tariff Dispute Impact

The Bank of Canada's decision to hold its key policy rate steady at 2.25% has raised concerns about a potential impact on business and consumer confidence due to a fresh U.S. tariff dispute.

The central bank's governing council met from August 25 to 26, just days after the United States imposed 50% tariffs on approximately $28 billion worth of Canadian goods on August 22.

Monetary policymakers felt that the Aug. 22 tariffs would hit targeted sectors hard but the overall impact on the economy would likely be modest at the time.

However, they noted that a re-escalating trade dispute could put a chill on household spending, business investment, and hiring, which could offset some of the inflationary pressures coming from high energy prices tied to the war in Iran.