Bank of Canada holds key interest rate at 2.25% as global risks weigh on outlook

The Bank of Canada kept its benchmark interest rate unchanged at 2.25 per cent on Wednesday, marking the fourth consecutive decision to hold rates, according to its latest monetary policy report. The central bank also maintained its deposit rate at 2.20 per cent.

Governor Tiff Macklem said ongoing conflict in the Middle East and evolving U.S. trade policies are reshaping global trade patterns and adding uncertainty to the economic outlook. According to the bank’s report, the Iran-related tensions have reduced growth prospects in oil-importing countries while contributing to higher inflation worldwide.

In Canada, the central bank said rising oil prices have added to inflationary pressure for consumers. However, as a major oil exporter, Canada is also seeing gains in national income from higher crude prices, partially offsetting domestic cost pressures.

Macklem said inflation is to rise toApproximately 3 per cent in April before easing back toward the bank’s 2 per cent target in early 2027. He added that the bank remains prepared to respond as needed depending on how economic conditions evolve.

The rate decision has direct implications for borrowers and businesses in provinces such as Alberta, where energy revenues influence both provincial finances and employment levels, while higher borrowing costs continue to affect household spending across the country.