Rate call looms for BoC as tariff dispute deepens

September 02, 2026 (MLN): The Bank of Canada is set to announce its latest interest rate decision on Wednesday, with policymakers under pressure to balance weaker growth against rising inflation as a fresh tariff war between Canada and the United States clouds the economic outlook.

Trade talks between the two countries collapsed after US President Donald Trump imposed 50% tariffs on a wide range of Canadian goods, marking an escalation in Washington's trade dispute with its second-biggest trading partner.

Canada has responded with retaliatory tariffs covering more than $20bn worth of goods, due to take effect on September 8, CNBC reported.

The central bank has held its benchmark rate unchanged at 2.25% for a sixth consecutive decision in July, down from a recent peak of 5%.

The Canadian economy expanded 0.8% in the second quarter, picking up pace from 0.1% growth in the first three months of the year.

Meanwhile, headline consumer inflation accelerated to 3% year-on-year in July, up from 2.8% in June, prompting traders to price in three BoC rate hikes over the coming 12 months.

Bank of America, however, expects the central bank to keep rates on hold in the months ahead.

Meanwhile, Goldman Sachs forecasts a 0.3 percentage point headwind to GDP growth and 0.3 percentage point boost to inflation in Canada as a result of Trump’s tariffs.

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