Live updates: Bank of Canada expected to hold key interest rate as trade war with U.S. escalates — SkimNews
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- Bank of Canada is expected to keep its policy rate at 2.25% for the seventh consecutive meeting, with Governor Tiff Macklem waiting for the trade-war dust to settle before moving.
- Canada has scheduled retaliatory tariffs on $27.6-billion of American imports for Sept. 8, a move that could trigger a further U.S. response or, alternatively, a return to negotiations.
- A Bank of Canada study of last year's Canadian countertariffs found they raised prices on targeted items by roughly 6% and added 0.3% to overall CPI inflation at the peak of the shock.
- Headline inflation is already sitting at the top of the central bank's control band, meaning an improving trade outlook could push the next move toward a hike rather than a cut.
- Macklem is likely to resurrect the scenario-based approach used through much of 2025 — presenting upside and downside paths rather than a single central forecast — given the rapidly shifting U.S. trade stance.
Why it matters: With $27.6-billion in Canadian countertariffs due Sept. 8, Macklem faces a two-sided shock: U.S. duties drag exports and inflation down while Canadian retaliation pushes domestic prices up. The central bank's own research shows last year's countertariffs added 0.3% to CPI at peak — so patience buys time, not insulation from inflation pressure.
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