EconoFACTS

August 13, 2025 | 14:01

BoC Summary of Deliberations (July 30) — All About Inflation

Economist

Managing Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal nearly two decades. He is re-sponsible for the Canadian macro-econom... (Read more)

Benjamin Reitzes

Managing Director, Canadian Rates & Macro Strategist
Fixed Income Strategy

Benjamin has been with the Bank of Montreal nearly two decades. He is re-sponsible for the Canadian macro-econom... (Read more)

The Bank of Canada's Summary of Deliberations reiterated that uncertainty around trade and concern about sticky inflation are keeping them sidelined for now. However, if the economy softens and inflation pressures ease, then the door is open to cutting further, as noted in the policy statement.

There's a split in the Governing Council, with some members believing that rates may not need to fall further. They cite the resilience in the economy (although we've really just avoided the worst case so far) in the face of tariffs. There's concern that further cuts could spark more inflation just as the economy is recovering.

Other members highlighted that persistent slack and ongoing labour market softness could warrant further easing. They note that if inflation slows, there's likely room to cut to facilitate the needed global trade adjustments and help absorb slack. These members seem to hold a bit more sway given the easing bias in the policy statement.

The BoC is focused on trade uncertainty, economic resilience and underlying inflation to shape the path for policy.

Key Takeaway: The prevalence of inflation discussions throughout the minutes highlights the dichotomy between the BoC and the Fed at the moment. The BoC sees underlying inflation at 2.5% y/y, with the range of metrics in the 2.5%-to-3% range. That's not good enough for Governor Council to green-light more easing. Meantime, U.S. core inflation is in a similar range, but the Fed is apparently far more eager to cut.