CHF: Light CHF Strength On BBG Tariff Report

• US MAY SERVICES PMI 53.7 (52.3 FLASH, 50.8 APRIL)

• Bank of Canada kept benchmark interest rate 2.75% Wednesday, in line with majority of economist expectations. 
• Second consecutive decision to hold signaled potential cut if economy weakens and inflation contained. 
• "On balance, members thought there could be a need for a reduction in the policy rate if the economy weakens in the face of continued US tariffs and uncertainty, and cost pressures on inflation are contained," Governor Macklem said.
• "At this decision there was a clear consensus to hold policy unchanged as we gain more information."
• Similar to previous statement BOC will continue monitoring timing and strength of downward pressure on inflation from a weaker economy and upward pressure from higher costs. BOC removed reference from prior statement that it could "act decisively" if the economy clearly moved in one direction. 
• BOC says core inflation higher than it had expected, possibly because of tariffs. 
• "The economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued," BOC said. 
• Recent surveys show consumers expecting higher prices and businesses intend to pass tariff costs to their customers, BOC also said. 
• "Governing Council is proceeding carefully, with particular attention to the risks. This means we are being less forward-looking than usual."
• The central bank will pay close attention to risks and uncertainties:  "extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve."

Following are Instant Answers for the Bank of Canada interest-rate decision:

• Overnight Rate Target (2.75%, unchanged, as majority of economists expected)
• Does the Bank signal it is prepared to LOWER rates in the future? Yes
• Does the Bank signal it is prepared to RAISE rates in the future? Not answered
• Does the Bank signal it intends to leave rates on hold? Not answered
• Does the Bank mention core inflation has been elevated or above the 2% target for headline CPI? Yes
• Does the Bank say the trade war is boosting inflation or inflation expectations? Yes
• Does the Bank say the risks to growth from the trade war appear to have eased? No