Once again, the Bank of Canada is holding its key interest rate, the overnight rate, steady at 2.25 per cent.
The bank rate is 2.5 per cent, and the deposit rate is 2.2 per cent.
The Bank hasn't adjusted interest rates since October 2025, and rationalized its announcement on Wednesday morning by pointing to the ongoing war in Iran, which continues to keep energy prices high, new American tariffs on Canadian goods, and the breakdown of trade talks between the two countries.
Canadian economic activity strengthened in the second quarter as real Gross Domestic Product grew by 3.3 per cent, following weak growth in the first. Consumption has seen solid gains; there was some growth in the housing supply, and exports and business development are up sharply. Labour market conditions are improving, and unemployment was 6.4 per cent in July. However, demand for labour is still subdued, and there are indications of excess supply in the economy.
Indicators reaffirm the bank's Governing Council's view that the economy is recovering, but uncertainty remains high with new U.S. tariffs.
Inflation is still hovering around three per cent in recent months. The Bank blames higher gas prices and said that if oil prices remain high, that could spill over into the cost of other goods and services.
It also cautions that Canada's counter-tariffs, set to take effect on Tuesday, will also raise costs for businesses.
American economic growth remains solid, driven by consumer spending and investments in Artificial Intelligence. The economy in the Euro area was stronger than expected, and China's economy slowed.
Overall, the Bank believes the global economy has shown resilience despite geopolitical headwinds.
The Bank will make its next policy rate announcement on October 28.
