Bank of Canada widely expected to trim rates as US trade war drags on

Core Viewpoint - The Bank of Canada is expected to reduce its key policy rate to 2.25% due to economic pressures exacerbated by President Trump's tariff threats [1][2]. Group 1: Rate Cut Expectations - Money markets indicate a more than 90% chance of a 25 basis point rate cut, an increase from 80% the previous week, following Trump's announcement of additional tariffs on Canada [2]. - Economists anticipated a rate cut even before the latest tariff threats, as economic data suggested insufficient growth to reduce high unemployment levels [3]. Group 2: Economic Conditions - The soft economy and job market are significant concerns for policymakers, with expectations that businesses will limit investments and hiring due to a poor demand outlook [3][4]. - There are worries about persistent inflation and the impact of an upcoming fiscal stimulus from the federal budget, but these factors do not diminish the need for economic support [4]. Group 3: Upcoming Announcements - The Bank of Canada will announce its monetary policy decision and release the quarterly Monetary Policy Report, which will include economic and inflation forecasts [5]. - The U.S. Federal Reserve is also expected to cut rates by 25 basis points to a range of 3.75-4.00% amid softer employment data [5].