The Bank of Canada is likely to look past the modest inflation impact of Canada's countertariffs against the US and focus instead on their larger drag on growth, said Rosenberg Research in a Wednesday note.
Canadian tariffs of up to 50% on US imports from Sept. 8 are expected to add no more than 0.3 percentage point to headline inflation, while the broader trade shock could reduce baseline real gross domestic product growth by around 0.5 percentage point, said Rosenberg Research.
With the Canadian economy only recently emerging from a weak start to the year, the growth drag is likely to outweigh the near-term inflationary impact, added Rosenberg.
The precedent is clear, with BoC Governor Tiff Macklem cutting rates twice after the April 2025 tariff shock, said Rosenberg.
The front end of the Government of Canada (GoC) bond curve is already reflecting expectations for renewed easing, according to Rosenberg.