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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.

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.