Bank of Canada Shrugs Off Tariff Deal, Holds Steady on Interest Rates

According to TD Securities, the Bank of Canada is unlikely to accelerate its interest rate hikes even if a tariff deal between Canada and the United States is reached. The central bank will remain data-dependent, focusing on inflation and economic growth rather than geopolitical trade headlines.

This means that borrowing costs may rise more gradually, providing some relief to variable-rate mortgage holders in Canada. For investors, this signals that the Bank of Canada prioritizes stability over rapid normalization.

Trade negotiations between Canada and the U.S. have been a key source of uncertainty for the Canadian economy, but TD Securities notes that even a favorable outcome would not necessarily lead to a faster path of rate increases. The central bank has repeatedly emphasized that its decisions are guided by economic data, not political events.

TD Securities expects the Bank of Canada to maintain its gradual approach to rate hikes, regardless of tariff developments. This perspective underscores the central bank's commitment to data-driven policy, which could help stabilize market expectations.