Bank of Canada set to hold rates as strong growth collides with trade risks
TLT•Trade tensions and labor data add to the backdrop
The improvement in growth came before U.S. President Donald Trump's new 50% tariffs on about $20 billion of Canadian goods took effect last month and Canada announced retaliatory duties on U.S. imports. Canada's retaliatory tariffs take effect next week.
"The risks are evolving, the risks are broadening," said Randall Bartlett, deputy chief economist at Desjardins Group. "But the risks still remain broadly balanced around inflation," he said, adding that moving rates now would be pre-emptive before the bank understands how lasting the tariff changes will be and what their economic impact will be.
The labor market has also strengthened, with the unemployment rate falling to a two-year low of 6.4% in July after strong job gains, although the jobless rate remains high by historical standards.
The BoC will announce its decision at 9:45 a.m. ET (1345 GMT).
Bank of Canada expected to hold policy rate at 2.25%
The Bank of Canada is widely expected to keep its key policy rate unchanged at 2.25% on Wednesday as recent strong economic growth gives it room to wait while a renewed trade war with the United States clouds the outlook.
All 35 economists polled by Reuters expect no change on Wednesday, while money markets are pricing roughly a 94% probability of no move.
