The Bank of Canada held interest rates unchanged on Wednesday, as expected, maintaining a wait-and-see stance as rising inflation risks compete with an increasingly uncertain growth outlook, said CIBC Economics in a note.
The BoC cited solid US growth, global resilience and a broad-based rebound in the Canadian economy in the second quarter, but warned that heightened trade uncertainty with the US has clouded the outlook, added CIBC.
Canada's central bank judged the direct impact of the US's latest tariffs would be limited but warned that broader trade uncertainty would continue to weigh on the economy, added CIBC.
Markets are placing greater weight on inflation risks than the weaker growth outlook, but ongoing uncertainty around oil prices and trade policy leaves little room for BoC rate moves in either direction through year-end, according to the bank.