Bank of Canada should hold fire while Fed moves — CIBC
The economy is operating with slack after the latest US tariff round, which imposed 50% duties on roughly 5% of Canadian exports as of August 22, with Ottawa’s counter-tariffs taking effect September 8.
Canada’s policy rate, at 2.25%, is already well below that of the United States, and interest-sensitive demand for capital goods and consumer durables has not gained meaningful traction.
Most critically, Shenfeld warns the Bank risks hiking directly into a trade-darkened outlook. A threatened 50% tariff on Canadian autos and parts come January 2027 has yet to be resolved, and the Canada-United States-Mexico Agreement (CUSMA) faces its own vulnerabilities if Washington continues imposing tariffs that contradict treaty obligations.
Shenfeld described Wednesday’s September 2 hold as unsurprising “amidst the fog of a trade war.”
The Bank of Canada will sound hawkish but act cautiously. Shenfeld expects it to defer actual rate hikes until after the new year — when, if a trade deal is back within reach, governing council will reassess.
