Canada Weekly: Bank holds off on further loosening awaiting trade clarity

While the Bank of Canada held rates steady at 2.75% this week - despite markets pricing in roughly 50% odds of a 25bp cut - it balanced this out by striking a mostly dovish tone in its communications. We think that is justified, as the recent cooling in trade tensions with the US has made a severe inflation scenario less likely, giving the Bank more room to focus on supporting an economy that is clearly losing steam due to the tariff shock. The upshot is we are comfortable with our view  that the Bank will cut rates three more times this year, taking the policy rate to 2.0%, which is more loosening than markets currently have priced in.