Bank of Canada. Photo courtesy of Anadolu.
The Bank of Canada kept its benchmark interest rate unchanged at 2.25 percent on Wednesday, citing continued uncertainty from the Iran conflict and shifting US trade policies as key risks to the global economy.
It also maintained the bank rate at 2.5 percent and the deposit rate at 2.20 percent, saying policymakers opted to stay on hold amid volatile external conditions.
Officials said developments in the Middle East and ongoing trade tensions have increased unpredictability in inflation trends and global growth prospects.
“The evolving conflict in the Middle East is causing heightened volatility and US trade policy continues to reshape global trade patterns. Both are ongoing sources of uncertainty,” the bank said.
The central bank noted that the Iran war has driven up energy costs and disrupted transport routes, with ripple effects on inflation and growth, particularly in countries dependent on oil imports.
It added that financial markets have been unstable, reacting to daily shifts in geopolitical tensions and changing expectations on interest rates and inflation.
For the global economy, the bank projected average growth of about 3 percent from 2026 to 2028, while also revising near-term inflation higher due to rising energy prices.
In Canada, growth forecasts were largely unchanged, with gross domestic product expected to expand 1.2 percent in 2026, 1.6 percent in 2027, and 1.7 percent in 2028, supported by domestic demand.
However, the bank warned that tariffs and trade uncertainty continue to weigh on exports and business investment, even as consumer and government spending provide some support to activity.
Inflation, which rose to 2.4 percent in March on higher gasoline prices, is projected to climb further to around 3 percent in April before easing.
The bank said inflation should return to its 2 percent target early next year if oil prices stabilize, adding that it will remain prepared to act if necessary to prevent sustained price pressures.