Bank of Canada worried fresh U.S. tariff dispute will weigh on confidence

OTTAWA - Concerns that a renewed trade dispute with the United States could negatively impact business and consumer confidence overshadowed the Bank of Canada's decision on interest rates last month. The central bank's governing council met shortly after the U.S. imposed heavy tariffs on Canadian products on August 22, prompting retaliatory measures in the weeks following the bank's decision to keep the key policy rate unchanged at 2.25 percent on September 2.

While policymakers believed the tariffs would primarily affect specific sectors, they were apprehensive that a resurgence in the trade conflict could dampen household spending, business investments, and hiring. In addition to monitoring the high energy costs stemming from the Iran War, the Bank of Canada considered the possibility of adjusting the policy rate in future meetings if inflationary pressures begin to spread beyond fuel prices.