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BoC Surveys Find Reduced Tariff Fears While Business Outlook Hits Yearly Low

Markets anticipate a hold on the policy rate at 2.75% as many firms and households brace for recession.

A view of the Bank of Canada building in Ottawa, Ontario, Canada May 8, 2025. REUTERS/Blair Gable/File photo
The Bank of Canada building in Ottawa.
Bank of Canada Senior Deputy Governor Carolyn Rogers looks on as Governor Tiff Macklem speaks during a news conference, in Ottawa, Wednesday, June 4, 2025. A pair of reports from the Bank of Canada say tariff-related uncertainty continued to put a damper on business and consumer sentiment in the second quarter, but the worst-case trade scenarios previously anticipated seem less likely. THE CANADIAN PRESS/Adrian Wyld
Governor of the Bank of Canada Tiff Macklem and Senior Deputy Governor Carolyn Rogers speak at a news conference on the Bank's interest rate announcement and release of the Monetary Policy Report in Ottawa, Wednesday, Jan. 29, 2025. THE CANADIAN PRESS/Justin Tang

Overview

  • Only around one-third of businesses now anticipate higher costs from U.S. tariffs, down from roughly two-thirds in the previous quarter.
  • The business outlook indicator dropped to negative 2.42, the lowest level in a year, and investment intentions remain well below long-term averages.
  • Firms’ short-term inflation expectations have returned to end-of-last-year levels, and the share of companies planning for a recession has eased slightly to 28%.
  • The Consumer Expectations Survey showed that 64.5% of Canadians expect a recession within 12 months, while spending intentions have weakened and job-loss fears have increased.
  • Market pricing indicates a strong chance the Bank of Canada will maintain its policy rate at 2.75% when it announces its July 30 decision.