Bank of Canada Holds Rates as Trade War Uncertainty Looms

The Bank of Canada is set to make its interest rate decision amidst renewed trade war pressures between Canada and the US. The central bank has kept its benchmark rate at 2.25% for nearly a year, but recent tariff volleys have changed the economic context.

Economists believe the Bank of Canada will stick to the status quo, trying to gauge how prices and the economy react to the escalating trade war. Financial market odds for a seventh straight hold in the policy rate stand at 99%.

BMO chief economist Doug Porter said it's possible the Canadian and US trade teams reconvene to avoid further escalation, but absent a return to the negotiating table, he expects the third quarter of the year to look like the early days of the trade war in 2025.