MNI:BOC Discussed `Optionality,' Broader Tariff Spillover Risk

Bank of Canada officials discussed the need to keep their options open amid higher geopolitical risks and the potential for heavy U.S. tariffs on a few industries to create wider economic damage, minutes from a decision two weeks ago to keep a 2.25% policy rate showed. 

"Geopolitical tensions and US trade policy remained unpredictable, and uncertainty about how the Canadian economy would adjust remained elevated. Against this backdrop, members agreed that they would need to maintain optionality in setting monetary policy," the Summary of Deliberations published Wednesday showed. Much of the document echoed statements from the earlier decision that focused on risks to the economy from U.S. trade disputes. 

"While spillovers to other sectors remained limited, production and employment could still decline more sharply than expected, weakening the broader economy and putting downward pressure on inflation." (See: MNI BOC WATCH: Rate Hold And Focus On Growing Political Risk)