Bank of Canada Holds Rate at 2.25% Amid Tariff Uncertainty

The Bank of Canada has maintained its key policy rate at 2.25%, a decision that was widely expected, but it emphasized that the risks to inflation have grown due to new US tariffs.

President Donald Trump's latest 50% tariffs on some Canadian imports took effect after the second-quarter GDP data, and economists have warned that these measures could hurt business and consumer sentiment. The Bank of Canada noted that 'new US tariffs and Canadian counter-tariffs will also raise costs for some businesses and could feed into consumer prices over time.'

Canada's economy rebounded at an annualized rate of 3.3% in the second quarter, but now faces competing risks from the escalating trade dispute. The Bank of Canada has room to wait and assess the impact of the tariffs before changing borrowing costs.