TD Securities strategists note the Bank of Canada’s (BoC) July Summary of Deliberations was balanced, with the Bank seeing the economy adjusting to recent shocks and expecting growth to strengthen, while worrying about medium-term inflation expectations drifting higher. The minutes emphasize upside inflation risks, downside growth risks, and discuss Oil and US tariffs, but offer no parallel guidance on rate cuts for trade tensions.

Balanced BoC but inflation concerns

"The Bank of Canada's Summary of Deliberations from July were relatively balanced as the Bank noted the economy is adjusting to recent shocks, which added to its confidence that growth would strengthen going forward."

"The minutes also cite concern over medium-term inflation expectations drifting higher, even as longer-term measures remain well anchored. The Bank was able to balance its message by expressing concern that stronger GDP growth might not be sustained, while the possibility of US tariffs was discussed as an "ever-present downside risk to growth"."

"While the minutes also discussed a potential policy response should oil prices "increase and stay higher", there was no similar language around potential rate cuts on an escalation in trade tensions."

"Overall, the July BoC minutes keep the focus on upside risks to inflation and downside risks to growth, with the caveat that its outlook is subject to a high degree of uncertainty."

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