Bank of Canada Holds Interest Rate Steady Amid Trade Tensions
The Bank of Canada held its benchmark interest rate steady at 2.25 per cent for the seventh time in a row, citing concerns over new U.S. tariffs and the ongoing conflict in Iran.
Bank of Canada governor Tiff Macklem said that while the economy was showing signs of rebounding, with 3.3 per cent annualized growth in the second quarter, the persistence of global conflicts has increased inflationary risks.
Macklem noted that global energy prices are continuing to float higher due to the conflict, and added that a re-escalation of trade disputes with the U.S. could lead businesses to delay investment and hiring decisions.
Some economists argued that Macklem's focus on rising inflationary risks gives the Bank of Canada a bias towards rate hikes, rather than cuts, although they differ on when such a move might happen.
Stephen Brown of Capital Economics said that the central bank will likely need to see further signs of improvement in the unemployment rate or economic growth before raising the policy rate.