Bank of Canada governors split on rebound sustainability, minutes show

Despite confidence in near-term GDP growth, some members voiced concerns about potential headwinds. These included businesses failing to adapt to U.S. tariffs, a stalled housing market in key cities like Toronto and Vancouver, waning consumer resilience, and flat exports and business investment. Governors agreed on the need to closely monitor economic data for signs of broadening growth as projected.

The central bank indicated it would look past the immediate effects of higher oil prices on inflation, but acknowledged the growing risk of broader price increases if elevated levels persist. They reiterated their commitment to preventing higher oil prices from causing sustained inflation. While some members noted an upward drift in medium-term inflation expectations, all agreed that longer-term expectations remained anchored.

The minutes highlighted the complexity of the bank's policy challenge, exacerbated by the Middle East conflict and U.S. trade policies. Hiking rates to combat oil-driven inflation could harm economic growth, while cutting rates to stimulate growth might fuel inflation. Ultimately, members concluded that the trade-off for monetary policy had diminished as growth resumed and inflation eased, though significant uncertainty persisted.