Canada Holds Rates as Tariff Uncertainty Lingers

Standard Chartered's economists expect the Bank of Canada to hold its policy rate steady at 2.25% in the upcoming meeting, deferring a potential 25-basis-point cut until December.

The bank cites rebounding Q2 growth as a reason for this decision, with GDP expanding at an annualized rate of 1.8%. However, policymakers may still prefer to wait for more data on how recent US tariffs will affect Canadian growth and inflation.

While there are downside risks to activity from the tariff escalation, the bank also suggests high odds of trade de-escalation. As a precautionary measure, an 'insurance' cut could be justified at the next decision if the BoC aims to shield the economy from an expected tariff shock.