Higher, lower or hold? Bank of Canada says direction for key rate is up in the air
The Bank of Canada held its benchmark interest rate at 2.25% for a fourth consecutive time, citing uncertainty over the war in Iran and future U.S. tariffs. Bank of Canada governor Tiff Macklem stated that the policy rate could go either higher or lower depending on how risks play out.
The Bank of Canada maintained its benchmark interest rate at 2.25% on Wednesday, marking the fourth consecutive time it has held the rate steady. Officials warned that uncertainty surrounding the war in Iran and the future of U.S. tariffs could influence the policy rate in the coming months. Bank of Canada governor Tiff Macklem stated that the key rate is likely at the right level if the economy follows the central bank's projections, but future adjustments are possible. The Bank of Canada identified two main sources of uncertainty: the war in Iran's impact on energy prices and the outcome of the Canada-U.S.-Mexico trade agreement review. If the U.S. imposes stricter trade restrictions, the bank may need to cut the policy rate to support the economy. Conversely, if the Iran war drives up global energy prices, the central bank may need to tighten monetary policy to control inflation.
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