Interest rates in Canada remained unchanged at 2.25%, in line with market expectations. Governor Tiff Macklem warned of growing upside risks to inflation, citing, among other factors, tensions in the Middle East. He also noted that new tariffs and an escalation in trade conflicts would raise costs for both businesses and consumers.
This adds uncertainty over the durability of the economic recovery, even though the economy and inflation are broadly evolving in line with the Bank of Canada’s July projections. The meeting statement also noted that financial conditions have tightened noticeably since the July meeting.
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