Bank of Canada Holds Rates as Inflation Concerns Rise with New Tariffs

The Bank of Canada maintained its key interest rate at 2.25% on Wednesday, in line with market expectations. The Canadian dollar rose by 0.37% following the decision.

BoC Governor Tiff Macklem expressed concern about high inflation and new U.S. tariffs on Canadian products. Consumer inflation hit 3.0% in July, driven by higher gasoline prices due to the war in Iran.

The BoC's rate statement noted that 'the upside risks to inflation have increased, while new tariffs make growth prospects more uncertain.' This decision leaves the central bank in a 'wait-and-see' mode, as its rate path will depend on U.S. tariff policy and developments in the Persian Gulf.