Bank of Canada Expected to Hold Rates at 2.25% Amid US-Canada Trade War

The Bank of Canada is expected by most people to leave its benchmark interest rate alone at 2.25% at Wednesday’s meeting. If that happens, it will be the seventh straight hold. That call lands in the middle of a worsening trade war between the U.S. and Canada, after the U.S. slapped a 50% tariff on roughly $20 billion of Canadian goods. Canada, for its part, plans to hit back with tariffs on selected U.S. products starting September 8. At the same time, higher oil prices have lifted Canada’s headline inflation to 3%, the hottest reading since 2023. A nasty stagflation problem, really: tariffs drag on growth, while energy prices keep inflation elevated. Even with Q2 GDP growth bouncing back to an annualized 3.3% and more than 180,000 jobs added from May through July, the trade war has pushed about two-thirds of surveyed economists to cut their business investment forecasts. And right now, markets think the Bank of Canada’s next rate hike may not arrive until the first half of 2027.