BoC Governor Macklem says since its last decision, the conflict in the Middle East has persisted without a clear path to resolution

Closer to home, US has imposed new tariffs on Canadian exports, and the Canadian government has responded with proportionate counter-tariffs and new supports for hard-hit businesses and workers. The increases in exports, investment and hiring are broadly consistent with what businesses have told us—they are adapting to tariffs, new technology and increased uncertainty. Overall, the data reaffirm our view of a broadening recovery. Market expectations for oil prices have shifted up since July. The Bank has been looking through the direct impact of higher oil prices on inflation, but we’re monitoring closely for any signs that they are spreading to the prices of other goods and service. Monetary policy cannot offset the effects of tariffs or influence global energy prices. What we can do is ensure global developments don’t jeopardize price stability in Canada. New US tariffs and increased trade uncertainty pose risks to the sustainability of the rebound in economic activity. If the tariffs remain in place, they will hit targeted sectors hard. But we don’t expect them to have a large direct impact on the overall level of economic activity. Have three main messages: First, economic growth in Canada has picked up after stalling over the past year. That puts us on a stronger footing as we face new challenges. But uncertainty about the sustainability of the rebound has increased with new US trade actions. Second, the ongoing conflict in the Middle East is keeping energy prices higher for longer, and this has increased the upside risks to the outlook for inflation. Third, the BoC is committed to keeping inflation close to the 2% target over time. We will be a source of stability as Canadians navigate shifting global developments.