Poloz says trade dispute, housing to ‘figure prominently’ in rate decision

The impacts of both the escalating cross-border trade fight and new mortgage rules will “figure prominently ” for the Bank of Canada ahead of its upcoming interest-rate decision, governor Stephen Poloz said Wednesday.

The central bank, Poloz said, has been incorporating into its projections the fallout of U.S. steel and aluminum tariffs and retaliatory measures by Canada and others.

In the lead-up to his July 11 rate announcement, the bank has also kept its focus on incoming, individual-level data that shows the effects of Canada’s new lending rules on the housing market and mortgage renewals. “We expect these issues to figure prominently in our upcoming deliberations,” Poloz told the Greater Victoria Chamber of Commerce.

The Trump administration announced it would slap punitive tariffs on Canada and other allies on May 31 — a day after Poloz made his last interest-rate announcement.

Before U.S. President Donald Trump imposed the tariffs, experts had widely predicted Poloz to raise his trend-setting rate at the upcoming July 11 policy meeting.

Since then, however, there have been growing doubts Poloz will hike at next month’s meeting.

“It seems that Poloz, like the market, may be for now on the fence for a July hike,” CIBC chief economist Avery Shenfeld wrote Wednesday in a research note. “We’ll stick to our call that rates will indeed rise in July, but it’s a close one.”

The Trudeau government has responded to the U.S. tariffs by threatening to impose levies of its own on many U.S. products in a reprisal that’s set to take effect Sunday. The dispute is expected to hurt both economies.

The deterioration of U.S. trading relationships with Canada and other key economies has also raised concerns of a global trade war.

Trump has also threatened to apply tariffs on automotive imports, which many warn would have far greater consequences for the Canadian economy.

Other factors that have also complicated Canada’s interest-rate outlook included unexpectedly weak inflation and retail sales numbers, and expectations that Friday ’s reading for real gross domestic product for April will show a dip.