The central bank is scheduled to announce its overnight rate on Wednesday
Canadian economists largely expect the Bank of Canada to keep its overnight rate at 2.25 per cent for the rest of the year, but what policymakers might do in 2027 is less clear as the trade war muddies the country’s economic outlook.
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The central bank is scheduled to announce its overnight rate on Wednesday, five days after Statistics Canada said the economy grew at a 3.3 per cent annualized rate in the second quarter.
The decision also comes after the federal government announced a broad list of counter-tariffs in response to United States President Donald Trump’s Section 338 tariffs, which were implemented on Aug. 22 after trade talks between the two countries broke down.
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Economists expect the central bank to hold the current overnight rate at least until the end of the year, according to updated forecast tables from National Bank of Canada, RBC Economics, TD Economics, BMO Capital Markets and Desjardins Group.
Members of the C.D. Howe Institute’s Monetary Policy Council (MPC) also unanimously called for the central bank to hold rates.
Jeremy Kronick, chief executive of the C.D. Howe Institute, said there was an argument for rate hikes before trade negotiations broke down because Canada’s economic data looked strong. Inflationary pressures that came from the global oil price shock hadn’t spread to other sectors and core inflation remained relatively anchored at two per cent.
However, he said the re-escalation of the Iran war has raised the risk that inflation could remain elevated for longer and will start to feed through to other consumer goods and services. The escalation of the U.S.-Canada trade dispute also jeopardized market access to the U.S. while threatening business investment and employment.
