Canada's own numbers argue for a rate hike. Second-quarter GDP grew at an annualized 3.4%, well above the Bank of Canada's own 2.5% forecast. Unemployment fell to 6.4% in July, the lowest since late 2024. Headline inflation rose to 3.0% year-over-year in July from 2.8% in June, driven by gasoline prices tied to the Strait of Hormuz disruption. Every one of those figures, taken alone, points toward tightening. The Bank will almost certainly hold at 2.25% anyway on September 2.
That is not a contradiction. It is the Bank choosing not to react to data it has reason to distrust, in a month when two much larger unknowns are set to arrive within days of each other.
Two Unknowns Land Before the Data Can Be Trusted
Canada's retaliatory tariffs take effect September 8, six days after the Bank's decision. Whatever inflationary or growth effect those tariffs produce has not shown up in a single data point the Bank will have in hand on September 2. A rate move made now, in either direction, would be a bet on an economic shock that has not yet occurred and whose size Ottawa itself has not yet quantified.
The second unknown lands even sooner. Federal Reserve Chair Kevin Warsh delivers his first Jackson Hole keynote on August 28, five days before the BoC's own decision, following a July FOMC meeting where three regional presidents dissented in favour of a hike, the widest split on the committee in roughly two decades. Whatever signal Warsh sends about the Fed's own path feeds directly into the yield differential the BoC has to manage. Governor Tiff Macklem does not want to set Canadian policy five days before finding out which way that differential is about to move.
The Chart Beneath the Headline Number
Since the Bank's last cut in October 2025, the overnight rate has not moved. Six consecutive holds have coincided with three distinct inflation prints that each looked, briefly, like they might force the Bank's hand: March's oil-driven spike to 2.4%, May's breach of the 3% ceiling, and July's Hormuz-linked climb back to 3.0%. Each time, the Bank characterized the pressure as external and temporary rather than domestic and durable, and each time it held.
Each CPI spike was attributed by the Bank to external energy price shocks rather than domestic demand, the same distinction likely to apply again in September. Source: Bank of Canada, Statistics Canada.
The pattern is the Bank privileging a narrow definition of the data it will act on. Core measures, which strip out the energy volatility driving the headline number, have stayed close to 2% through all three episodes. September 2 is very likely to be the seventh instance of that same distinction holding.
Where This Actually Bites
The distinction matters more this time because the next scheduled decision, October 28, arrives with a full month of post-tariff data behind it and Warsh's framework established. If the September 8 tariffs prove more inflationary than transitory, or if Warsh signals a Fed more willing to hold rates higher for longer, the case for a Canadian hike gets considerably stronger by late October than it is today. Government of Canada 10-year yields sat at 3.68% Friday, close to the two-month high of 3.72% touched August 10, already pricing in some of that uncertainty ahead of the data that will resolve it.