Bloomberg: Bank of Canada may hold rates steady to assess impact of trade tensions

The Bank of Canada is expected to hold interest rates steady at its meeting on Wednesday, pausing after eight consecutive cuts to borrowing costs. The move reflects caution as officials assess the impact of trade tensions fueled by US President Donald Trump’s policies, Bloomberg reports.

Trade strains remain a key factor in the central bank’s decision-making, the agency notes. After the US imposed tariffs on Canadian steel, aluminum, and automobiles, Ottawa retaliated with its own trade restrictions. The uncertainty is already denting business confidence and consumer sentiment, raising the risk of stagflation in Canada.

As Bank of Canada Governor Tiff Macklem previously noted, the central bank will maintain a cautious stance until the situation becomes clearer. Officials emphasize they cannot allow potential price shocks from trade tensions to develop into sustained inflationary pressures.

According to Royce Mendes of Desjardins, the current situation is fundamentally different from crisis scenarios that would demand immediate action. For this reason, Canada’s central bank can afford to take a wait-and-see approach.