Bank of Canada Holds Key Rate Amid Rising Inflation Risks

The Bank of Canada held its key interest rate at 2.25 per cent on Tuesday, warning that inflation risks have increased due to persistently high energy prices and ongoing trade tensions.

The bank's decision was expected by many economists, as it has kept the policy rate unchanged since January to help mitigate the impact of higher borrowing costs on a slowing economy.

The Bank of Canada said recent data support its view that Canada's economic recovery is broadening, with GDP up 3.3 per cent in the second quarter and unemployment rate edging down to 6.4 per cent in July.

However, it warned that uncertainty remains high and new US tariffs pose risks to the sustainability of the recovery, as well as the potential for inflation to rise further due to spillover effects from higher energy prices.