Canadian Dollar: Trade war complicates BoC path – Standard Chartered

Standard Chartered economist Dan Pan expects the Bank of Canada (BoC) to keep its policy rate at 2.25% and delay a 25bps cut to December, citing a Q2 growth rebound that reduces the need for immediate easing. The report highlights downside growth risks from recent US tariffs, but also notes high odds of trade de-escalation and questions market pricing of BoC hikes by mid-2027.

BoC cut delayed despite tariff risks

"We now expect the Bank of Canada (BoC) to keep the policy rate unchanged at 2.25% and defer the 25bps cut to December."

"The Q2 growth rebound should reduce the need for imminent monetary easing."

"Despite the recent tariff escalation, policy makers may want to wait for more data to gauge the impact of the new tariffs on growth and inflation."

"A case could be made for an insurance cut next week if the BoC wants to cushion the economy against the looming tariff shock."

"Markets are now pricing in c.65bps of hikes by mid-2027, which we think is excessive."