Bank of Canada Stays Firm Amid Inflation Risks

The Bank of Canada has decided to hold its interest rate at 2.25%, citing rising inflation risks due to persistently high oil prices and the potential impact of Canadian counter-tariffs.

GDP growth in the second quarter was a respectable 3.3%, while the unemployment rate edged down to 6.4% in July, but these factors may not be enough to offset broader inflationary pressures.

The Bank noted that long-term bond yields have increased globally, including in Canada, which means borrowers are facing higher fixed mortgage rates.

Mitigating factors include subdued labour demand and excess supply in the economy, but the Bank is still concerned about upside risks to inflation.