OTTAWA, October 1 (Reuters) – The Bank of Canada is set to unveil baseline economic projections and inflation expectations in its forthcoming monetary policy report this October, according to a summary of its recent discussions released on Wednesday.
Rather than providing concrete estimates for Canada’s economy starting in the second quarter, the central bank chose to offer a spectrum of projections that consider the impact of U.S. tariffs on the economic landscape.
Governor Tiff Macklem cited significant uncertainty surrounding the potential effects of heightened tariffs by U.S. President Donald Trump, questioning whether they would drive inflation higher or hinder economic growth.
“With the relative stability regarding U.S. tariffs since the July Report, members anticipated being able to provide a baseline projection for growth and inflation in the October Monetary Policy Report,” the minutes from the September 17 rates meeting noted.
Last month, the BoC lowered its key policy rate to a three-year low of 2.5%, marking its first cut in half a year, indicating readiness for further reductions should economic risks escalate in the coming months.
Current market speculation suggests a greater than 55% chance of another 25 basis point rate cut on October 29.
The rate-setting committee acknowledged during their meeting that inflationary risks were diminishing.
They observed that most counter-tariffs on U.S. products had been eliminated, concluding that there was no longer a significant threat of tariffs affecting Canadian consumers or triggering secondary price increases.
“Reduced input costs arising from labor, transportation, and materials are likely to lead to lower inflationary pressures in the future,” the meeting minutes stated.
However, the committee noted that risks still persisted.
The Governing Council indicated the possibility of a further slowdown in economic growth as adjustments in business investment and employment continue.
Discussions also highlighted that slower population growth and a weakening labor market could lower growth in household spending in the months ahead.
Moreover, ongoing weak business investment was expected to continue affecting economic growth through the latter half of the year.
Nonetheless, members maintained that consumption should continue to prop up growth, with the economy projected to expand in line with the “current tariff scenario” outlined in the July policy report.
The upcoming renegotiations of the free trade agreement among the U.S., Mexico, and Canada was seen as a potential source of uncertainty, possibly hindering a swift recovery in business investment in the short term.
