Bank of Canada set to grapple with renewed trade war pressures in rate decision

OTTAWA - The Bank of Canada faces a challenging situation this week as escalating trade tensions with the United States cloud the outcome of Wednesday's interest rate decision. After Canada and the U.S. trade talks broke down earlier this month, the central bank has kept its benchmark rate at 2.25 per cent for nearly a year. With new tariffs imposed on Canadian exports and the threat of steeper levies on autos starting next year, economic uncertainty is high.

Economists and markets largely expect the Bank of Canada to maintain its current policy rate as they gauge the impact of the trade war on prices and the economy. The Bank of Canada's governor, Tiff Macklem, has warned that any escalation in trade restrictions could prompt the central bank to ease policy rather than tighten.