Ongoing trade tensions, Iran war top concerns for Bank of Canada despite economic growth, deliberations show

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeNewsEconomyOngoing trade tensions, Iran war top concerns for Bank of Canada despite economic growth, deliberations showGoverning council agreed that the main economic risks had heightened since the July Monetary Policy ReportTiff Macklem, governor of the Bank of Canada, during a news conference in Ottawa on June 10, 2026. Photo by HYUNGCHEOL PARK/Postmedia filesMonetary policy makers at the Bank of Canada were confident that the economy was on stronger footing ahead of the latest round of tariffs but concerned about whether that momentum could be sustained amid heightened inflation risks and trade war uncertainty, as they debated where to take the policy interest rate earlier this month.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe central bank released a summary of the deliberations that led its governing council to hold the overnight rate at 2.25 per cent for the seventh consecutive time.Officials acknowledged in the summary that the 3.3 per cent annualized growth rate in the second quarter was slightly higher than expected, which suggested the economy rebounded following flat growth last year.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try againHowever, governing council agreed that the main economic risks had grown since the July Monetary Policy Report.Global energy prices remained elevated as renewed hostilities in the Middle East in recent months had pushed Canada’s inflation rate above the two per cent target for longer than anticipated, the summary said, which increased the risks of high gasoline prices passing through to other goods and services and becoming generalized inflation.It also noted that the new round of Section 338 tariffs likely negatively affected business and consumer confidence, which could in turn impact consumer spending, business investment and hiring more broadly and dampen economic growth. The breakdown in trade negotiations, levying of new tariffs and threats of further trade measures made growth prospects more uncertain.However, officials said the resulting economic weakness from the trade tensions could contain the pass-through of higher energy prices and keep inflationary pressures at bay.They also agreed that the economy was still in excess supply and the labour market remained soft, despite broadening economic growth.“With the economy and inflation evolving broadly as forecast in the July (Monetary Policy Report), governing council decided to leave the policy interest rate unchanged at 2.25 per cent,” the report said.The Bank of Canada rate announcement came before the inflation rate remained steady at three per cent year over year in August, due to slower growth for gasoline and grocery prices.The inflation rate ran hot for roughly four consecutive months in the summer, hitting 3.2 per cent in May and 2.8 per cent in June.The central bank’s decision came after trade talks with the U.S. fell apart in late August, when Prime Minister Mark Carney told Canadian negotiators to return to Ottawa after American officials introduced last-minute demands which he said would threaten Canada’s economy and sovereignty.Governing council officials said they will monitor whether the economic recovery is sustained as trade tensions with the U.S. continue to escalate, and whether energy inflation passes through to other goods and services.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Economists say inflation will continue to hover above the two per cent target as long as global oil prices remain high, which will push gasoline prices up for consumers.Bank of Canada governor Tiff Macklem has in the past few months repeatedly said that the central bank remains committed to keeping inflation at the two per cent target and to being a “source of stability” for Canadians. However, he didn’t provide a forecast about future rate cuts or hikes.“The data we’ve received since our last decision was broadly in line with our forecasts,” he said at a news conference after the rate announcement on Sept. 2. “But as I’ve just outlined, the risks are shifting and we are prepared to adjust monetary policy as needed.”The Bank of Canada is widely expected to hold its benchmark interest rate steady again at its next decision on Oct. 28, when it will also release its quarterly monetary policy report.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.