Bank of Canada Holds Key Rate Amid Tariff Uncertainty

The Bank of Canada has maintained its key interest rate at 2.25 per cent for the fifth time this year, as policymakers assess the impact of tariffs and global energy prices on inflation.

Bank of Canada Governor Tiff Macklem acknowledged that monetary policy cannot offset the effects of tariffs or influence global energy prices, but stated that the central bank can ensure global developments do not jeopardize price stability in Canada.

The decision to keep the interest rate unchanged comes as inflation rose to three per cent in July, driven by volatile gas prices resulting from the Iran war. Economic growth has also shown signs of rebounding, with a 3.3 per cent annualized growth in the second quarter.

Macklem noted that exports are on the rise and businesses are adapting to trade restrictions, but warned that counter-tariffs could increase costs for Canadian businesses and pose an inflation risk if higher prices are passed on to consumers.