Bank of Canada Expected to Pause Rate Cuts Amid Inflation Concerns

The Bank of Canada (BoC) faces a pivotal decision regarding interest rates this week amid rising inflation and unpredictable U.S. trade policies. Economists are divided on whether the BoC will pause its rate-cutting cycle or implement another reduction, with a majority leaning towards maintaining the current rate of 2.75%. The fluctuating tariffs imposed by the U.S. have created economic uncertainty, complicating the BoC's ability to forecast future conditions. Recent data indicates that inflation has risen to 2.6%, adding pressure on the central bank as it navigates potential recession risks. The upcoming policy announcement is seen as a critical moment that could influence equity and bond markets in Canada and beyond, particularly as policymakers emphasize the need for caution amid external pressures. Governor Tiff Macklem will reveal the decision on Wednesday, along with the bank's quarterly monetary policy report, the first to include a range of economic forecasts post-pandemic.