Bank of Canada holds rate as tariffs, oil prices cloud outlook

Investing.com -- The Bank of Canada kept its policy rate unchanged on Wednesday as a strengthening domestic economy was weighed against rising inflation risks from elevated oil prices and growing uncertainty over trade with the United States.

The central bank held its overnight rate target at 2.25%, with the Bank Rate at 2.50% and the deposit rate at 2.20%. The decision was in line with its July outlook, but policymakers warned that risks to inflation had increased while new U.S. tariffs had made the growth outlook more uncertain.

Canada’s economy rebounded strongly in the second quarter after a weak start to the year, with the recovery broadening across consumption, housing, exports and business investment. The unemployment rate also edged lower in July, although the Bank said labour demand remained subdued and the economy continued to show excess capacity.

The Bank said inflation had hovered around 3% in recent months, driven largely by persistently higher gasoline prices. Excluding gasoline, inflation stood at 2.2% in July, while its preferred measures of core inflation remained close to 2%.

“With the Middle East conflict still ongoing and little progress reopening the Strait of Hormuz, upside risks to the Bank’s inflation forecast have increased,” the Bank said.

This is a developing story, please check back for updates.

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