Bank of Canada Holds Key Rate Amid Ongoing Trade Tensions

The Bank of Canada maintained its benchmark interest rate at 2.25% on Wednesday, in line with economists' expectations. This marks the seventh consecutive decision to leave the policy rate unchanged since December 2025.

Bank officials cited recent data confirming a 'broadening recovery' in the economy, but also noted that risks of higher inflation have increased due to new US tariffs and the escalating conflict with Iran.

The Canada-US trade war has escalated significantly since July, with the US imposing 50% tariffs on $28 billion worth of Canadian products. In response, Canada will match those levies with dollar-for-dollar tariffs on comparable US goods starting September 8.

CIBC chief economist Avery Shenfeld said that Wednesday's hold was not a surprise 'amidst the fog of a trade war.' He noted that newly heightened uncertainty over trade relations clouds the picture and makes it difficult to predict what lies ahead.