Bank of Canada Holds Rates Amid Trade Tensions

The Bank of Canada is expected to keep its overnight rate at 2.25% for another year, according to a Reuters poll of economists. The decision comes as policymakers wait for more stability on trade tensions with the United States.

The Canadian dollar has weakened due to the failed trade talks, which may lead to added inflation pressure. However, an escalation in the trade war is expected to mainly be a drag on gross domestic product growth in Canada rather than a source of increased inflation pressure.

Nearly half of economists surveyed said the Bank will raise rates at least once by end-Q2 2027. The Bank's decision to keep rates steady is in line with market pricing and follows the suspension of trade talks between Canada and the United States.