Bank of Canada Holds Interest Rate Steady

(MENAFN) The Bank of Canada decided on Wednesday to leave its benchmark interest rate unchanged at 2.25%, stating that the ongoing Iran war and shifting US trade policies continue to obscure the broader economic outlook.

The central bank maintained its overnight rate target at 2.25%, while also keeping the bank rate at 2.5% and the deposit rate at 2.20%.

“The evolving conflict in the Middle East is causing heightened volatility and US trade policy continues to reshape global trade patterns. Both are ongoing sources of uncertainty,” it said.

The institution explained that the Iran war has triggered a sharp rise in energy costs and caused disruptions in transportation networks, which in turn has dampened growth prospects for oil-importing nations while simultaneously increasing inflationary pressures around the world.

It also noted that financial markets have remained unstable, influenced by rapidly changing developments in the Middle East as well as shifting expectations regarding inflation and interest rates.

Looking ahead, the bank projects that the global economy will expand by roughly 3% across 2026, 2027, and 2028. However, it revised its inflation outlook for the coming year upward, driven largely by the recent surge in energy prices.

For Canada specifically, the growth forecast remains broadly consistent with its January assessment. Real GDP is expected to increase by 1.2% in 2026, followed by 1.6% in 2027 and 1.7% in 2028.

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