BoC Interest Rate Decision Looms Amid Trade War Uncertainty
The Bank of Canada is set to make its next move on interest rates this week, as policymakers face mounting pressure to balance slowing growth against rising inflation.
A fresh tariff dispute between Canada and the US has added to the uncertainty, with US President Donald Trump imposing 50% tariffs on a range of Canadian goods. In response, Canada is set to impose retaliatory tariffs covering over $20bn worth of goods starting September 8, as reported by CNBC.
The central bank's benchmark rate has been unchanged at 2.25% for six consecutive decisions since July, down from its recent peak of 5%. The Canadian economy expanded 0.8% in the second quarter, a slight improvement from 0.1% growth in the first three months.
However, consumer inflation accelerated to 3% year-on-year in July, up from 2.8% in June, prompting traders to predict three BoC rate hikes over the coming 12 months. Bank of America expects the central bank to keep rates steady in the short term, while Goldman Sachs forecasts a 0.3 percentage point headwind to GDP growth and a 0.3 percentage point boost to inflation as a result of Trump's tariffs.