Bank of Canada Holds Key Rate Amid Inflation Concerns

The Bank of Canada left its key interest rate unchanged at 2.25% on Wednesday, as Governor Tiff Macklem emphasized the need to prioritize multiple risks in play.

Macklem said that inflationary pressures have increased since the last decision in July, with global oil prices remaining high and no end in sight for the Middle East conflict.

The central bank has been monitoring whether cost pressures from the war in Iran will spread into other areas of the consumer basket. Inflation was 1 percentage point above the Bank of Canada's 2% target at 3% in July, which Macklem said is too high for comfort.

Frances Donald, chief economist at RBC, noted that Macklem prioritized inflation risks over growth concerns and pushed back against expectations that the central bank would focus on threats to growth from a re-escalating trade war with the United States.