Bank of Canada Governor Tiff Macklem issued a stark assessment of the domestic outlook on Monday, telling an audience at the Halifax Partnership that continued US tariffs risk cutting Canadian output growth in the current quarter by roughly half, pushing the annualized pace under 1%. The remarks, tied to a scheduled speech and press conference, are among the governor's most concrete comments to date on how much drag the trade dispute with Washington is putting on near-term activity.
Alongside that growth warning, Macklem flagged a separate concern on prices. With crude trading close to the $100-a-barrel mark, he said the bank anticipates upward pressure on consumer inflation over the months ahead. Taken together, the two comments capture the awkward spot policymakers find themselves in: a trade shock weighing on output at the same time an energy shock is lifting the cost of living.
The remarks build on the bank's September 2 decision to leave its benchmark rate unchanged at 2.25%, a call officials justified at the time by pointing to a less certain growth path stemming from new US trade measures alongside a rising skew of risks to the inflation outlook. Monday's appearance effectively refreshes that message with a sharper, more quantified estimate of how much the tariff overhang could shave off fourth-quarter activity.
The dispute itself traces back to a series of US duties imposed on Canadian goods this year, which Ottawa answered with matching, dollar-for-dollar countermeasures alongside relief programs for affected industries and workers. Macklem has previously argued that the direct hit to trade volumes is limited because the newest US levies apply to only a portion of Canadian exports, even though the associated uncertainty has done broader damage to business and consumer sentiment.
Governing Council is not scheduled to announce its next rate decision until October 28, leaving markets to parse Monday's comments as the clearest available signal of how the bank's internal debate is shifting. A materially weaker growth track would typically build the case for easier policy, but a firmer, energy-driven inflation trend cuts the other way, complicating any near-term shift in stance.
The Halifax appearance is the latest in a series of public remarks this year in which Bank of Canada officials have tried to explain how they are weighing an unusually contradictory set of forces: tariffs threatening growth, oil threatening prices, and a policy rate that has to somehow answer to both. With the next scheduled decision still weeks away, Macklem's comments are likely to stand as the primary guide to the bank's thinking until Governing Council meets again.