BoC Expected to Hold Interest Rate Amid Trade Uncertainty

The Bank of Canada is widely expected to leave its benchmark interest rate unchanged at 2.25% on September 2, as policymakers weigh stronger-than-expected economic growth against renewed trade tensions with the United States.

A Reuters survey of 35 economists found that every respondent expects the Bank to hold the rate this week, with a consensus suggesting borrowing costs could remain unchanged through much of 2027. Market pricing puts the probability of another hold at about 99%.

The Canadian economy has sent conflicting signals: it recorded a strong rebound in the second quarter, expanding at an annualized rate of approximately 3.3%, but inflation stood at three percent in July, up from 2.8% in June and at the upper end of the Bank's one-to-three-per-cent inflation-control range.

The renewed Canada, U.S. trade dispute has complicated the outlook, with Washington imposing 50% tariffs on roughly five percent of Canadian exports after negotiations between the two governments collapsed. Ottawa plans to introduce retaliatory tariffs on American goods beginning September 8.