BoC concerned trade war will weigh on confidence, deliberations show

Fears that a reigniting trade dispute with the United States could hamper business and consumer confidence loomed large over the Bank of Canada’s interest rate decision earlier this month.

The central bank today released a summary of the deliberations that led to its decision to hold the key policy rate steady at 2.25 per cent on Sept. 2.

The Bank of Canada’s governing council convened in the days after the United States imposed sharp tariffs on a range of Canadian goods on Aug. 22 – a move that kicked off a series of retaliatory actions in the weeks after the bank’s rate decision.

Opinion: Canada should lower pointless tariffs on goods from countries other than the U.S.

Monetary policy-makers felt at the time that those new tariffs would hit targeted sectors hard but the overall impact on the economy would likely be modest.

And while economic growth had picked up heading into the latest tariff wave, the deliberations show the governing council was worried a re-escalating trade dispute could put a chill on household spending, business investment and hiring.

The Bank of Canada is also keeping an eye on high energy prices tied to the war in Iran and monetary policy-makers discussed the possible need to adjust the policy rate in future meetings if cost pressures start to spread beyond the gas pumps.