Tariffs Fuel Inflation Concerns Amid Economic Slowdown

Recent surveys indicate that Canadian consumers and businesses are bracing for higher inflation, fueled by ongoing trade wars and tariffs between Canada and the U.S. While households expect inflation to reach 4.1% over the next year, they are also planning to save more and make fewer major purchases, signaling potential economic stagnation. Similarly, business leaders anticipate inflation climbing to 3.3%, but plan to reduce hiring and investment, which could further dampen economic growth. Economists suggest that the Bank of Canada is likely to prioritize these downside risks over inflation concerns when setting interest rates. In the U.S., tariffs are also impacting market stability, with concerns that they may lead to confusion and reduced merger activity, as businesses face uncertainty regarding input costs and economic growth. The Federal Reserve is caught in a bind, needing to balance inflation pressures with rising unemployment rates, which complicates their monetary policy decisions.