Bank of Canada Sees Less Catastrophic Tariff Concerns from Businesses

The Bank of Canada has opted to maintain its interest rate at 2.75 percent, influenced in part by improved business sentiment amid ongoing trade tensions with the United States. Deputy Governor Sharon Kozicki highlighted that businesses feel less threatened by worst-case tariff scenarios than earlier in the year, signaling a reduction in catastrophic outlooks despite persistent economic uncertainty. The central bank is increasingly relying on non-traditional and timely data sources such as business and consumer surveys, border traffic volumes, and sector-specific consultations to better gauge economic impacts, as traditional data often lag behind current conditions. While firms anticipate a weakening in economic activity and potential job risks, their diminished fears of severe tariff fallout provide some relief. This cautious optimism contrasts with declining sentiment among U.S. CPA executives, who express growing pessimism about the U.S. economy and the effects of tariffs on business planning. Overall, the Bank of Canada remains vigilant, using expanded data inputs to navigate the uncertain trade environment and its effects on monetary policy decisions.