Bank of Canada Holds Interest Rate Amid Geopolitical Uncertainty

The Bank of Canada maintained its overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. The decision was made despite ongoing concerns about high energy prices due to the Middle East conflict, as well as new US tariffs on Canadian exports.

Senior Deputy Governor Carolyn Rogers noted that the global economy has shown resilience in the face of geopolitical headwinds, with growth broadly consistent with the July Monetary Policy Report projection. However, inflation remains a concern, particularly with still-high oil prices and elevated margins for refined energy products.

The Canadian dollar has appreciated slightly on US-dollar weakness, while long-term bond yields have moved up globally, including in Canada. The Bank of Canada also highlighted that Canadian economic activity strengthened in the second quarter, with GDP up by 3.3%, following very weak growth in the first quarter.