Ottawa- The Bank of Canada has decided to hold its key overnight interest rate at 2.25%, citing ongoing global uncertainty driven by the escalating Middle East conflict and shifting U.S. trade policies.
In its latest update, the central bank acknowledged that the war involving Iran has triggered a surge in global energy prices and disrupted transportation networks, contributing to higher inflation worldwide. While oil-exporting countries like Canada may benefit from increased revenues, consumers are facing higher gasoline costs.
Inflation in Canada rose to 2.4% in March and is expected to climb to around 3% in April, largely driven by rising fuel prices. However, the Bank noted that core inflation remains just above 2%, and long-term inflation expectations are still stable.
Economic growth in Canada is projected to remain modest, with GDP expected to increase by 1.2% in 2026 before gradually improving in the following years. The labour market remains soft, with unemployment hovering between 6.5% and 7%, and housing activity continues to be constrained by affordability challenges and slower population growth.
Globally, the economy is forecast to grow by about 3% annually through 2028, though risks remain elevated due to geopolitical tensions and trade uncertainties. The United States is expected to maintain solid growth, while higher energy costs may weigh on economic activity in Europe.
The Bank emphasized it is closely monitoring developments and stands ready to adjust monetary policy if inflationary pressures become more persistent. Officials reiterated their commitment to maintaining price stability and supporting economic confidence during a period of global volatility.
Rupinder Mann says
Unemployment data remains on a higher side.
Growth projections seems promising if achieved.