Bank of Canada Holds Rates Steady Amid Trade War Uncertainty

The Bank of Canada is widely expected to hold interest rates steady at 2.25 percent today, following a year of no changes. However, investors are pricing in a potential rate hike by January and three more by July, which would take the central bank's benchmark interest rate to 3 percent.

Economists on Bay Street have overwhelmingly projected that rates will hold steady this year, but market watchers will be closely parsing Governor Tiff Macklem's comments for any clues on the rate path. The Bank of Canada is facing a tricky situation due to the ongoing trade war with the United States, which constrains economic growth while also raising prices.

Canada imposed countertariffs on some American goods last year and plans to do so again this month, which could give a modest lift to inflation. However, the added risk is that consumers are facing major pain at gas stations due to the conflict in the Middle East.