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Bank of Canada holds at 2.25%, flags possible rate hikes
The BoC said inflation is too high and linked the uptick largely to gasoline and higher oil prices, while also citing renewed uncertainty from US tariffs and trade actions.
The Bank of Canada left its overnight interest rate unchanged at 2.25%, but delivered a more cautious tone as inflation risks rose and the outlook for the recovery grew harder to assess, according to FXStreet.
Governor Tiff Macklem said multiple rate increases could be needed if inflation remained a problem, emphasizing that future decisions would be guided by inflation forecasts and the risks around them rather than any single data point.
The BoC pointed to a difficult mix including subdued labour demand, continued excess supply, and greater uncertainty about whether the rebound can be sustained.
In its discussion of risks, the bank highlighted new US tariffs and the threat of further trade action as factors clouding growth prospects, while ongoing Middle East conflict has kept energy prices higher for longer. The BoC also addressed a recent bond-market sell-off, with Macklem noting global bond yields spilling into Canada and framing the move as a repricing of risk rather than a sign of financial instability.