Bank of Canada expected to hold interest rates for a third consecutive time today, as Trump's tariff deadline nears
Yahoo6 days ago
The Bank of Canada is expected to hold its benchmark interest rate for a third consecutive announcement when it reveals its decision at 9:45 a.m. ET today. The announcement comes amid fraught trade negotiations with the United States ahead of an August 1 deadline and an economy showing some signs of strain from the unresolved conflict.
Ahead of the announcement, economists polled by Reuters were unanimous in their expectations for a hold. While recent economic growth has been below potential, there have been mixed signals from the job market and core inflation measures remain stubbornly above the Bank's target. In a note to clients on Monday, BMO economist Robert Kavcic pointed out that both "hawks and doves can make very reasonable cases at this point," suggesting the Bank will wait for more clarity.
In a speech last month, Governor Tiff Macklem stuck to his tariff-era mantra that monetary policy cannot offset the impact of a protracted trade conflict. 'What we can do is make sure Canadians don't have to worry about big changes in their cost of living,' he said.
In its June decision the Bank also held its policy rate stable.
Follow Yahoo Finance Canada's live blog for news, updates and analysis of the Bank of Canada's interest rate announcement below.
Core inflation trends: 'Far too warm'
A likely focus of today's announcement and a source of questions from the media are the trends in core inflation.
Bank economists almost universally highlighted the core data in the most recent CPI release, and noted that those measures have been substantially higher than the overall inflation figures for quite some time.
The main question, BMO's Douglas Porter suggested, is why are the core numbers remaining elevated even amid weak growth and signs of economic struggles? He suggests the sources are the long tail of shelter costs in the data, as well as upward pressure on groceries and other goods from the trade war.
Scotiabank's Derek Holt, who has been critical of past cuts, wrote that the June core data 'continue the trend of far too warm underlying pressures on inflation.' He warned that the BoC 'has not yet won the fight against past drivers of inflation, let alone forward-looking uncertainties that could keep it sticky.'
Why the Bank of Canada loves its core inflation gauges, and how they work
Bank of Canada policymakers often refer to 'preferred measures of core inflation' as a key metric behind rate decisions. This year's drop in gas prices is a prime example of why these stripped-down price gauges are so important to the bank.
According to pump price data from Kalibrate, the national average price for a litre of regular grade gasoline is down about 15 per cent year-over-year. Ottawa's elimination of the consumer-facing carbon tax, and the cancellation of corresponding levies in some provinces, are the big reasons why.
Statistics Canada says falling gas prices last year created what economists call a 'base-year effect,' which can distort the appearance of current trends. In this case, the base-year effect on gasoline prices put upward pressure on the Consumer Price Index (CPI) in June.
'While consumers continued to pay less at the pump on a year-over-year basis in June (-13.4 per cent), the decline was smaller than in May (-15.5 per cent),' the agency wrote last month. 'The smaller decline was a result of a larger month-over-month decrease in June 2024 (-3.1 per cent) compared with June 2025 (-0.7 per cent).'
The Bank of Canada uses a trio of modified CPI baskets to strip away different types price volatility. These 'preferred measures of core inflation' include CPI-trim, CPI-median, and CPI-common.
Here's how they work:
CPI-trim: This measure 'trims' away 20 per cent of the weighted monthly price variations at the bottom and top of the distribution of price changes. By removing this volatile 40 per cent, policymakers can filter out things like the impact of severe weather on food prices, for example.
CPI-median: This looks at the middle value of the price changes for all items in the CPI basket when they are ranked from lowest to highest. The aim is to eliminate big price fluctuations for a reading on a typical item in each category.
CPI-common: This tracks common price changes across the 55 components in the CPI basket, filtering out price fluctuations that are specific to individual components for a more stable indicator of inflationary pressures.
Core inflation trends: 'Far too warm'
A likely focus of today's announcement and a source of questions from the media are the trends in core inflation.
Bank economists almost universally highlighted the core data in the most recent CPI release, and noted that those measures have been substantially higher than the overall inflation figures for quite some time.
The main question, BMO's Douglas Porter suggested, is why are the core numbers remaining elevated even amid weak growth and signs of economic struggles? He suggests the sources are the long tail of shelter costs in the data, as well as upward pressure on groceries and other goods from the trade war.
Scotiabank's Derek Holt, who has been critical of past cuts, wrote that the June core data 'continue the trend of far too warm underlying pressures on inflation.' He warned that the BoC 'has not yet won the fight against past drivers of inflation, let alone forward-looking uncertainties that could keep it sticky.'
A likely focus of today's announcement and a source of questions from the media are the trends in core inflation.
Bank economists almost universally highlighted the core data in the most recent CPI release, and noted that those measures have been substantially higher than the overall inflation figures for quite some time.
The main question, BMO's Douglas Porter suggested, is why are the core numbers remaining elevated even amid weak growth and signs of economic struggles? He suggests the sources are the long tail of shelter costs in the data, as well as upward pressure on groceries and other goods from the trade war.
Scotiabank's Derek Holt, who has been critical of past cuts, wrote that the June core data 'continue the trend of far too warm underlying pressures on inflation.' He warned that the BoC 'has not yet won the fight against past drivers of inflation, let alone forward-looking uncertainties that could keep it sticky.'
Why the Bank of Canada loves its core inflation gauges, and how they work
Bank of Canada policymakers often refer to 'preferred measures of core inflation' as a key metric behind rate decisions. This year's drop in gas prices is a prime example of why these stripped-down price gauges are so important to the bank.
According to pump price data from Kalibrate, the national average price for a litre of regular grade gasoline is down about 15 per cent year-over-year. Ottawa's elimination of the consumer-facing carbon tax, and the cancellation of corresponding levies in some provinces, are the big reasons why.
Statistics Canada says falling gas prices last year created what economists call a 'base-year effect,' which can distort the appearance of current trends. In this case, the base-year effect on gasoline prices put upward pressure on the Consumer Price Index (CPI) in June.
'While consumers continued to pay less at the pump on a year-over-year basis in June (-13.4 per cent), the decline was smaller than in May (-15.5 per cent),' the agency wrote last month. 'The smaller decline was a result of a larger month-over-month decrease in June 2024 (-3.1 per cent) compared with June 2025 (-0.7 per cent).'
The Bank of Canada uses a trio of modified CPI baskets to strip away different types price volatility. These 'preferred measures of core inflation' include CPI-trim, CPI-median, and CPI-common.
Here's how they work:
CPI-trim: This measure 'trims' away 20 per cent of the weighted monthly price variations at the bottom and top of the distribution of price changes. By removing this volatile 40 per cent, policymakers can filter out things like the impact of severe weather on food prices, for example.
CPI-median: This looks at the middle value of the price changes for all items in the CPI basket when they are ranked from lowest to highest. The aim is to eliminate big price fluctuations for a reading on a typical item in each category.
CPI-common: This tracks common price changes across the 55 components in the CPI basket, filtering out price fluctuations that are specific to individual components for a more stable indicator of inflationary pressures.
Bank of Canada policymakers often refer to 'preferred measures of core inflation' as a key metric behind rate decisions. This year's drop in gas prices is a prime example of why these stripped-down price gauges are so important to the bank.
According to pump price data from Kalibrate, the national average price for a litre of regular grade gasoline is down about 15 per cent year-over-year. Ottawa's elimination of the consumer-facing carbon tax, and the cancellation of corresponding levies in some provinces, are the big reasons why.
Statistics Canada says falling gas prices last year created what economists call a 'base-year effect,' which can distort the appearance of current trends. In this case, the base-year effect on gasoline prices put upward pressure on the Consumer Price Index (CPI) in June.
'While consumers continued to pay less at the pump on a year-over-year basis in June (-13.4 per cent), the decline was smaller than in May (-15.5 per cent),' the agency wrote last month. 'The smaller decline was a result of a larger month-over-month decrease in June 2024 (-3.1 per cent) compared with June 2025 (-0.7 per cent).'
The Bank of Canada uses a trio of modified CPI baskets to strip away different types price volatility. These 'preferred measures of core inflation' include CPI-trim, CPI-median, and CPI-common.
Here's how they work:
CPI-trim: This measure 'trims' away 20 per cent of the weighted monthly price variations at the bottom and top of the distribution of price changes. By removing this volatile 40 per cent, policymakers can filter out things like the impact of severe weather on food prices, for example.
CPI-median: This looks at the middle value of the price changes for all items in the CPI basket when they are ranked from lowest to highest. The aim is to eliminate big price fluctuations for a reading on a typical item in each category.
CPI-common: This tracks common price changes across the 55 components in the CPI basket, filtering out price fluctuations that are specific to individual components for a more stable indicator of inflationary pressures.
Ahead of the announcement, economists polled by Reuters were unanimous in their expectations for a hold. While recent economic growth has been below potential, there have been mixed signals from the job market and core inflation measures remain stubbornly above the Bank's target. In a note to clients on Monday, BMO economist Robert Kavcic pointed out that both "hawks and doves can make very reasonable cases at this point," suggesting the Bank will wait for more clarity.
In a speech last month, Governor Tiff Macklem stuck to his tariff-era mantra that monetary policy cannot offset the impact of a protracted trade conflict. 'What we can do is make sure Canadians don't have to worry about big changes in their cost of living,' he said.
In its June decision the Bank also held its policy rate stable.
Follow Yahoo Finance Canada's live blog for news, updates and analysis of the Bank of Canada's interest rate announcement below.
Core inflation trends: 'Far too warm'
A likely focus of today's announcement and a source of questions from the media are the trends in core inflation.
Bank economists almost universally highlighted the core data in the most recent CPI release, and noted that those measures have been substantially higher than the overall inflation figures for quite some time.
The main question, BMO's Douglas Porter suggested, is why are the core numbers remaining elevated even amid weak growth and signs of economic struggles? He suggests the sources are the long tail of shelter costs in the data, as well as upward pressure on groceries and other goods from the trade war.
Scotiabank's Derek Holt, who has been critical of past cuts, wrote that the June core data 'continue the trend of far too warm underlying pressures on inflation.' He warned that the BoC 'has not yet won the fight against past drivers of inflation, let alone forward-looking uncertainties that could keep it sticky.'
Why the Bank of Canada loves its core inflation gauges, and how they work
Bank of Canada policymakers often refer to 'preferred measures of core inflation' as a key metric behind rate decisions. This year's drop in gas prices is a prime example of why these stripped-down price gauges are so important to the bank.
According to pump price data from Kalibrate, the national average price for a litre of regular grade gasoline is down about 15 per cent year-over-year. Ottawa's elimination of the consumer-facing carbon tax, and the cancellation of corresponding levies in some provinces, are the big reasons why.
Statistics Canada says falling gas prices last year created what economists call a 'base-year effect,' which can distort the appearance of current trends. In this case, the base-year effect on gasoline prices put upward pressure on the Consumer Price Index (CPI) in June.
'While consumers continued to pay less at the pump on a year-over-year basis in June (-13.4 per cent), the decline was smaller than in May (-15.5 per cent),' the agency wrote last month. 'The smaller decline was a result of a larger month-over-month decrease in June 2024 (-3.1 per cent) compared with June 2025 (-0.7 per cent).'
The Bank of Canada uses a trio of modified CPI baskets to strip away different types price volatility. These 'preferred measures of core inflation' include CPI-trim, CPI-median, and CPI-common.
Here's how they work:
CPI-trim: This measure 'trims' away 20 per cent of the weighted monthly price variations at the bottom and top of the distribution of price changes. By removing this volatile 40 per cent, policymakers can filter out things like the impact of severe weather on food prices, for example.
CPI-median: This looks at the middle value of the price changes for all items in the CPI basket when they are ranked from lowest to highest. The aim is to eliminate big price fluctuations for a reading on a typical item in each category.
CPI-common: This tracks common price changes across the 55 components in the CPI basket, filtering out price fluctuations that are specific to individual components for a more stable indicator of inflationary pressures.
Core inflation trends: 'Far too warm'
A likely focus of today's announcement and a source of questions from the media are the trends in core inflation.
Bank economists almost universally highlighted the core data in the most recent CPI release, and noted that those measures have been substantially higher than the overall inflation figures for quite some time.
The main question, BMO's Douglas Porter suggested, is why are the core numbers remaining elevated even amid weak growth and signs of economic struggles? He suggests the sources are the long tail of shelter costs in the data, as well as upward pressure on groceries and other goods from the trade war.
Scotiabank's Derek Holt, who has been critical of past cuts, wrote that the June core data 'continue the trend of far too warm underlying pressures on inflation.' He warned that the BoC 'has not yet won the fight against past drivers of inflation, let alone forward-looking uncertainties that could keep it sticky.'
A likely focus of today's announcement and a source of questions from the media are the trends in core inflation.
Bank economists almost universally highlighted the core data in the most recent CPI release, and noted that those measures have been substantially higher than the overall inflation figures for quite some time.
The main question, BMO's Douglas Porter suggested, is why are the core numbers remaining elevated even amid weak growth and signs of economic struggles? He suggests the sources are the long tail of shelter costs in the data, as well as upward pressure on groceries and other goods from the trade war.
Scotiabank's Derek Holt, who has been critical of past cuts, wrote that the June core data 'continue the trend of far too warm underlying pressures on inflation.' He warned that the BoC 'has not yet won the fight against past drivers of inflation, let alone forward-looking uncertainties that could keep it sticky.'
Why the Bank of Canada loves its core inflation gauges, and how they work
Bank of Canada policymakers often refer to 'preferred measures of core inflation' as a key metric behind rate decisions. This year's drop in gas prices is a prime example of why these stripped-down price gauges are so important to the bank.
According to pump price data from Kalibrate, the national average price for a litre of regular grade gasoline is down about 15 per cent year-over-year. Ottawa's elimination of the consumer-facing carbon tax, and the cancellation of corresponding levies in some provinces, are the big reasons why.
Statistics Canada says falling gas prices last year created what economists call a 'base-year effect,' which can distort the appearance of current trends. In this case, the base-year effect on gasoline prices put upward pressure on the Consumer Price Index (CPI) in June.
'While consumers continued to pay less at the pump on a year-over-year basis in June (-13.4 per cent), the decline was smaller than in May (-15.5 per cent),' the agency wrote last month. 'The smaller decline was a result of a larger month-over-month decrease in June 2024 (-3.1 per cent) compared with June 2025 (-0.7 per cent).'
The Bank of Canada uses a trio of modified CPI baskets to strip away different types price volatility. These 'preferred measures of core inflation' include CPI-trim, CPI-median, and CPI-common.
Here's how they work:
CPI-trim: This measure 'trims' away 20 per cent of the weighted monthly price variations at the bottom and top of the distribution of price changes. By removing this volatile 40 per cent, policymakers can filter out things like the impact of severe weather on food prices, for example.
CPI-median: This looks at the middle value of the price changes for all items in the CPI basket when they are ranked from lowest to highest. The aim is to eliminate big price fluctuations for a reading on a typical item in each category.
CPI-common: This tracks common price changes across the 55 components in the CPI basket, filtering out price fluctuations that are specific to individual components for a more stable indicator of inflationary pressures.
Bank of Canada policymakers often refer to 'preferred measures of core inflation' as a key metric behind rate decisions. This year's drop in gas prices is a prime example of why these stripped-down price gauges are so important to the bank.
According to pump price data from Kalibrate, the national average price for a litre of regular grade gasoline is down about 15 per cent year-over-year. Ottawa's elimination of the consumer-facing carbon tax, and the cancellation of corresponding levies in some provinces, are the big reasons why.
Statistics Canada says falling gas prices last year created what economists call a 'base-year effect,' which can distort the appearance of current trends. In this case, the base-year effect on gasoline prices put upward pressure on the Consumer Price Index (CPI) in June.
'While consumers continued to pay less at the pump on a year-over-year basis in June (-13.4 per cent), the decline was smaller than in May (-15.5 per cent),' the agency wrote last month. 'The smaller decline was a result of a larger month-over-month decrease in June 2024 (-3.1 per cent) compared with June 2025 (-0.7 per cent).'
The Bank of Canada uses a trio of modified CPI baskets to strip away different types price volatility. These 'preferred measures of core inflation' include CPI-trim, CPI-median, and CPI-common.
Here's how they work:
CPI-trim: This measure 'trims' away 20 per cent of the weighted monthly price variations at the bottom and top of the distribution of price changes. By removing this volatile 40 per cent, policymakers can filter out things like the impact of severe weather on food prices, for example.
CPI-median: This looks at the middle value of the price changes for all items in the CPI basket when they are ranked from lowest to highest. The aim is to eliminate big price fluctuations for a reading on a typical item in each category.
CPI-common: This tracks common price changes across the 55 components in the CPI basket, filtering out price fluctuations that are specific to individual components for a more stable indicator of inflationary pressures.
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