Bank of Canada keeps key interest rate at 2.25%, cites trade and inflation risks

The Bank of Canada has announced it is maintaining its key policy interest rate at 2.25 per cent for a fifth consecutive decision, citing continued uncertainty around global trade and inflation pressures.

Bank of Canada Governor Tiff Macklem said the outlook for monetary policy remains uncertain due to ongoing trade tensions with the United States and rising geopolitical risks in the Middle East. According to the central bank, weak economic growth and elevated oil prices are creating competing pressures on the Canadian economy.

Macklem outlined two possible scenarios that could influence future interest-rate decisions. He said the bank could consider rate cuts if new or expanded U.S. trade restrictions significantly weaken Canada's economic growth and business activity.

However, Macklem said a prolonged conflict in the Middle East could keep oil prices elevated and contribute to broader inflation pressures across Canada. In that scenario, the Bank of Canada could be required to tighten monetary policy, including potential interest-rate increases, to keep inflation under control.

The central bank said future decisions will depend on incoming economic data and the balance between growth risks and inflation pressures.