BOC Holds Rates Steady Amid Tariff Fears

The Bank of Canada is widely expected to keep interest rates steady at its upcoming policy meeting on September 2, according to futures markets. The odds of a rate hold are at 99%, with the current overnight interest rate sitting at 2.25% for nearly a year.

The Canadian economy grew at an annualized 3.3% in the second quarter, its fastest pace in over three years. However, the Bank's projections expect economic growth to slow down in the second half of the year, particularly due to new US tariffs on Canadian goods and elevated crude oil prices.

Bank Governor Tiff Macklem has warned that if energy prices lead to inflation elsewhere in the economy, interest rates might be raised. On the other hand, any escalation of trade tensions between Canada and the US could prompt a rate cut to stimulate the domestic economy.