Trade truce gives cover for the BoC to pause

Despite the economy facing the existential threat of 25% tariffs back in March, the Bank of Canada seemed reluctant to commit to aggressive policy loosening because of upside inflation risks. With tariffs proving less severe than most had feared and underlying inflation running far above 2%, we now expect the Bank to keep its policy rate unchanged at 2.75% next week – although it may be forced to cut if equity markets do not stabilise before then.