Trade deal to leave ‘bad outcome’ for Canada and U.S., ex-minister says

TD Securities' Robert Both anticipates the Bank of Canada will adopt a cautious approach even if a tariff agreement is finalized. The Bank requires additional information on how reduced tariffs influence exports and output, as key trade statistics will not be available until November. TD projects the Bank of Canada will maintain a hold on rates through 2026 and make its first rate increase in January, despite a reduced output gap.

The institution will await more data on the impact of lower tariffs, which will not be available until November. TD Securities continues to expect the Bank of Canada to remain on hold through 2026 prior to raising interest rates in January. While the Bank of Canada has been closely monitoring trade tensions as a potential downside risk, recent data suggests the backdrop of surplus oil supplies should enable the institution to exercise patience and observe how exports react.