Bank of Canada Holds Rate at 2.25% for Seventh Consecutive Meeting, Warns of Dual Risks from Trade Conflicts and Energy Inflation
nashnova research
The Bank of Canada held its overnight rate at 2.25% for a seventh consecutive meeting. Governor Tiff Macklem warned that escalating U.S.–Canada trade friction and rising energy prices are jointly pushing inflation risks higher — two opposing forces that leave the bank standing still until the data clears.
The economy is growing — so why not move?
Q2 GDP grew at an annualized 3.3%, beating the bank's own 2.5% forecast, with exports, consumer spending, and business investment all improving.
Macklem acknowledged firms are "adapting to tariffs and uncertainty" — then immediately added that new U.S. tariffs put the sustainability of the rebound in doubt.
This means → the strong data is a backward-looking scorecard; the bank is watching the risks ahead, not the scenery in the rearview mirror.
How far has the trade conflict escalated?
The U.S. has already imposed 50% tariffs on selected Canadian goods. Canada's retaliatory tariffs are set to take effect next Tuesday.
Dual tariffs — each side taxing the other — will raise both corporate input costs and consumer prices simultaneously.
In plain terms = two layers of tariffs create a "tax sandwich" on traded goods, and consumers on both sides end up paying the bill.
Why has energy suddenly become a new variable?
The U.S.–Iran ceasefire reached in June collapsed over the summer; military conflict resumed this week, and shipping through the Strait of Hormuz — a chokepoint for roughly 20% of global oil transit — remains disrupted.
Macklem stated clearly: market oil-price expectations have shifted markedly higher since July, and upside risks to the inflation forecast have risen with them.
This means → expensive oil is not just a fuel-pump problem. The longer high prices persist, the more they spread into other goods — turning a one-off shock into sustained inflation.
Is "standing still" confidence or confusion?
Former HSBC economist David Watt offered a pointed reading: "The hold is less about the rate being right and more about the bank not knowing whether it is wrong."
In plain terms = when you are unsure whether to turn left or right, the safest move is to stay where you are.
The actual impact of tariffs once they land and the trajectory of energy prices are the two key signposts for the next rate decision.
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