"In the projections we are presenting today, we have added more negative judgment to our business investment forecast in recognition of this", he said.
"We have also incorporated the effects of the USA tariffs on steel and aluminum, and the various countermeasures implemented around the world".
As in April, the projection incorporates an estimate of the impact of trade uncertainty on Canadian investment and exports.
The bank's relatively sanguine view of the trade risk boosted the Canadian dollar to its strongest in almost four weeks, and economists said they expected the central bank to hike again by year end.
Money markets see a almost 70 per cent chance of further Bank of Canada tightening by December.
"Although there will be hard adjustments for some industries and their workers, the effect of these measures on Canadian growth and inflation is expected to be modest", the bank said in a statement. The BoC believes United States steel tariffs will be felt in the second half of 2018 but could take longer.
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The fourth rate increase since July 2017 comes as Canada grapples with the pressures of rising inflation and solid job growth despite an increasingly hostile US trade policy that could choke off demand from Canada's largest export market.
The bank said USA steel and aluminum tariffs imposed in June and retaliatory countermeasures by Canada in July would trim exports, imports and economic growth, and boost inflation, but strong global demand and higher commodity prices were offsetting the tariff headwind.
Canada, which has its own trade dispute with the United States, exports many commodities and runs a current account deficit so its economy could also be hurt if the flow of trade or capital slows. It warns that "escalating trade tensions pose considerable risks to the outlook" at the global level. Household spending is being dampened by higher interest rates and tighter mortgage lending guidelines.
For its part, the bank said Wednesday that it's expecting higher interest rates will still be necessary over time to keep inflation near its target.
The Bank of Canada raised its benchmark interest rate by 25 basis points to 1.50 per cent, the fourth hike since last summer. It also said underlying wage growth has been weaker than what would normally be expected in a tightened job market. Temporary factors are causing volatility in quarterly growth rates: the Bank projects a pick-up to 2.8 per cent in the second quarter and a moderation to 1.5 per cent in the third.
Canadian government bond prices were mostly lower across a flatter yield curve, with the two-year down 4 cents to yield 1.959 per cent and the 10-year falling 5 cents to yield 2.156 per cent.