The Bank of Canada left its benchmark interest rate untouched on Wednesday, keeping the overnight target at 2.25% as policymakers weighed a soft domestic economy against the inflationary pull of a months-long war in the Middle East.
It marks another hold in a stretch where the central bank has signalled patience rather than action. The Bank Rate stands at 2.5% and the deposit rate at 2.20%.
Governing Council framed the decision as a balancing act. Economic activity has been weak, uncertainty around US trade policy persists, and the Middle East conflict—now in its fourth month—has kept oil prices elevated. The Bank said it is continuing to look through the war’s near-term effect on headline inflation, while drawing a firm line against letting higher energy costs harden into something more lasting.
The data gave it room to wait. Canadian GDP edged down 0.1% in the first quarter, weaker than the Bank had projected in April, as government spending unexpectedly fell and business investment stayed soft. Employment rose in May, but the central bank noted that hiring has been essentially flat since the start of the year. The unemployment rate sat at 6.6%.
Inflation, meanwhile, climbed to 2.8% in April, driven largely by energy. Core measures have drifted back toward 2%, though the Bank expects total inflation to hover near 3% in the near term before easing—with global oil running roughly $10 a barrel above its April assumptions.
The central bank reiterated that it stands ready to respond as the outlook shifts, and pointed to maintaining confidence in price stability through a turbulent global moment.
The next rate decision is scheduled for July 15, alongside the Bank’s updated Monetary Policy Report.
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