Bank of Canada Holds Interest Rate Steady Amid Escalating Trade War with US

The Bank of Canada held its benchmark interest rate steady at 2.25% on Wednesday, marking the seventh consecutive time it has maintained this level. This decision comes as the trade war with the US escalates, posing a risk to economic growth and pushing up consumer prices.

As widely expected, the central bank's governing council kept the policy rate unchanged, despite the uncertainty surrounding the Canadian economy. The breakdown in trade negotiations with Washington last month has added to this uncertainty, along with another wave of American tariffs and Ottawa's threat to retaliate.

New US tariffs on around $28-billion worth of Canadian goods will weigh on exports, jobs, and investment in Canada, which should put downward pressure on inflation over time. However, Canada's retaliatory tariffs on American imports, scheduled to come into force on Sept. 8, will push up prices in Canada.