Bank Of Canada Leaves Rates Unchanged Amid Uncertainty About Iran, U.S. Trade Policy

(RTTNews) - Citing ongoing uncertainty, the Bank of Canada on Wednesday announced its widely expected to leave interest rates unchanged for the fourth consecutive meeting.

The Bank of Canada said it decided to maintain its target for the overnight rate at 2.25 percent, with the Bank Rate at 2.5 percent and the deposit rate at 2.20 percent.

The decision to once again leave rates unchanged came as the Canadian central bank noted the evolving conflict in the Middle East is causing heightened volatility and U.S. trade policy continues to reshape global trade patterns.

"We are closely monitoring the impact of the conflict in the Middle East and how the economy is responding to US tariffs and trade policy uncertainty," the BoC said.

While acknowledging the Iran war has led to sharply higher energy prices and transportation disruptions, the BoC said its Governing Council is looking through the war's immediate impact on inflation but will not let higher energy prices become persistent inflation.

The BoC said it stands ready to respond as needed and remains committed to maintaining Canadians' confidence in price stability through this period of global upheaval.

Looking ahead, the Canadian central bank said consumer price inflation is expected to rise further to 3 percent in April after climbing by 2.4 percent in March because of sharply higher gasoline prices.

Based on the assumption that oil prices will ease, however, the BoC said inflation is forecast to come down to the 2 percent target early next year.

The BoC also forecast GDP growth of 1.2 percent in 2026, rising to 1.6 percent in 2027 and 1.7 percent in 2028 as growth in exports and business investment resumes along a lower trajectory.

"While the war in Iran may alter its composition, overall GDP growth is little changed in the updated forecast," the BoC said. "Since Canada is a large net exporter of oil, higher oil prices increase national income even as consumers are squeezed by higher gasoline prices."