OTTAWA — The Bank of Canada is facing a difficult monetary-policy decision this week as renewed trade tensions with the United States complicate the outlook for inflation and economic growth.

The central bank is scheduled to announce its latest interest-rate decision on September 2, with its benchmark rate currently at 2.25%. Economists have largely expected policymakers to keep rates unchanged, but the latest tariff escalation has created new uncertainty.

The United States imposed 50% tariffs on certain Canadian exports on August 22, while Canada is preparing counter-tariffs. U.S. President Donald Trump has also threatened additional tariffs on Canadian automobiles and auto parts beginning in 2027.

At the same time, Canada's economy delivered stronger-than-expected second-quarter growth of 3.3% on an annualized basis, supported by stronger exports, consumer spending and business investment.

The challenge for policymakers is that tariffs could push up prices while simultaneously weakening business activity and household demand.

The September decision will therefore be closely watched for clues about whether the Bank of Canada sees inflation or slowing growth as the bigger risk facing the Canadian economy.