Bank of Canada Holds Rates at 2.25% Amid Trade Tension Concerns
The Bank of Canada kept its key policy rate steady at 2.25% on September 2, marking the seventh consecutive hold. Deliberations revealed concerns that renewed trade tensions with the U.S., triggered by new tariffs, could dampen business and consumer confidence, despite a resilient domestic economy.
The Bank of Canada (BoC) held its key policy rate steady at 2.25 per cent on Sept. 2, marking the seventh consecutive interest rate hold. 
Deliberations released later revealed significant concern among policymakers that renewed trade tensions with the United States could dampen business and consumer confidence. The U.S. imposed 50 per cent tariffs on roughly $28 billion worth of Canadian goods on Aug. 22. BoC governing council meetings began shortly after this imposition, on Aug. 25.
Monetary policymakers believed the Aug. 22 tariffs would hit targeted sectors hard but have a modest impact on the overall economy due to a resilient domestic landscape. However, they worried about broader uncertainty affecting spending and investment. The BoC did not view Canada’s counter-tariffs as a significant inflationary risk because they targeted intermediate inputs and goods with Canadian substitutes. 
Meanwhile, the bank noted upside risks from high energy prices linked to the war in Iran, monitoring for potential inflationary pass-through effects. Global financial conditions have tightened, raising long-term bond yields. Canadian bond yields rose, though less than in several other advanced economies.
On Wednesday, the U.S. Federal Reserve raised its policy rate by a quarter point, marking its first hike in three years. As of Wednesday afternoon, market odds for a Bank of Canada rate hike next month stood at 60 per cent. October marks one year since the Bank of Canada’s last interest rate move, which was a cut of 0.25 percentage points.