Bank of Canada Expected to Hold Rates Amid Trade War Uncertainty

The Bank of Canada is expected to hold its key policy rate steady at 2.25% on Wednesday, despite strong economic growth in the second quarter. The economy grew at an annualized rate of 3.3%, above the central bank's 2.5% forecast, due to a surge in exports and domestic demand.

However, the outlook is clouded by a renewed trade war with the United States, which has imposed tariffs on Canadian goods. Canada has retaliated with its own tariffs, set to take effect next week.

Economists are divided on what this means for interest rates. Some believe that the central bank will wait until it gets a clearer picture of how the trade dispute affects growth and prices before making any moves.

According to Randall Bartlett, deputy chief economist at Desjardins Group, 'The risks are evolving, the risks are broadening' but remain broadly balanced around inflation.