The Bank of Montreal has revised its interest rate outlook, predicting the Bank of Canada will cut in October amid heightened trade tensions between the United States and China.    

“Last week’s escalation in the trade war and growing evidence of the protectionist toll on the U.S. and global economies have tipped us into the rate-cut camp for the Bank of Canada’s Oct. 30 meeting,” BMO Capital Markets Senior Economist Sal Guatieri and Analyst Priscilla Thiagamoorthy wrote in a note to clients Tuesday.

The BMO Economics team said they expect the central bank will set the stage for a rate cut at its next meeting on Sept. 4 with a dovish statement citing trade uncertainty.

Meanwhile, BMO Capital Markets Chief Economist Douglas Porter said in a note Friday that if the Bank of Canada is going to move on rates, the Oct. 30 meeting seems the most logical, as it falls the week after the federal election and a day before the U.K.’s deadline to leave the European Union.

Porter added investors have been “screaming” for rate cuts since the bank’s latest decision to stand pat in July, as economic risks have become “unbalanced.” He said BMO was “grappling mightily” with the market’s anticipation of a rate cut and maintained its view the central bank would remain patient.  

BMO Economics’ revised forecast on Tuesday comes days after U.S. President Donald Trump ordered U.S. companies to "immediately start looking for an alternative to China,” after China retaliated with higher tariffs on U.S. goods. The back-and-forth sent markets plummeting.

However, Trump struck a softer tone at the G7 summit in Biarritz, France on Monday, claiming Chinese officials called saying they wanted to get back to the negotiating table, which China declined to confirm.