The Bank of Canada on Wednesday held its key lending rate at 1.75 percent, saying it expects the Canadian economy to slow in the second half of the year.
A bump in domestic growth in the second quarter was likely temporary, it said in a statement, amid an outlook dampened by the ongoing China-US trade conflict.
"In sum, Canada's economy is operating close to potential and inflation is on target," the bank said. "However, escalating trade conflicts and related uncertainty are taking a toll on the global and Canadian economies."
US growth has moderated but remains solid -- buoyed by consumer and government spending, it noted.
Commodity prices, however, have fallen.
At home, stronger energy production and robust export growth sent Canada's economy unexpectedly soaring in the second quarter.
That uptick, announced in late August after a disappointing end to 2018 and a weak first quarter, was good news for Prime Minister Justin Trudeau less than two months before elections.
Housing activity regained strength and wages picked up further, the bank said.
But consumption spending has been soft and business investment contracted sharply amid heightened trade uncertainty, it warned.