Bank of Canada Building: By Taxiarchos228, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=11974266
OTTAWA — The Bank of Canada held its key interest rate steady Wednesday, citing growing global uncertainty tied to conflict in the Middle East and mixed signals in the domestic economy.
The central bank kept its target for the overnight rate at 2.25 per cent, with the bank rate at 2.5 per cent and the deposit rate at 2.20 per cent.
Officials say rising geopolitical tensions have increased volatility in global energy prices and financial markets, adding uncertainty to the economic outlook.
Oil and natural gas prices have climbed sharply since the outbreak of conflict in the Middle East, raising concerns about higher inflation in the near term. Supply disruptions and transportation bottlenecks, including impacts linked to the Strait of Hormuz, could also affect other commodities such as fertilizer.
The Bank said the global economy had been on track to grow at around three per cent before the conflict, with steady performance in the United States and continued export strength in China.
In Canada, economic data has been mixed. Real gross domestic product contracted by 0.6 per cent in the fourth quarter of 2025, largely due to a decline in inventories, while domestic demand remained relatively strong.
The labour market has softened, with employment gains late last year reversing in early 2026. The unemployment rate rose to 6.7 per cent in February.
Inflation has eased, with the consumer price index slowing to 1.8 per cent in February from 2.3 per cent the previous month. Core inflation measures are also near the Bank’s two per cent target, although food prices remain elevated.
The central bank warned that rising energy costs are expected to push inflation higher in the coming months.
The Bank said risks to economic growth are tilted to the downside due to trade uncertainty and weaker recent data, while inflation risks have increased because of higher energy prices.
Governing council members said they will continue to monitor developments, including the impact of U.S. trade policy and the evolving situation in the Middle East, and stand ready to adjust policy as needed.
The Bank of Canada’s next interest rate decision is scheduled for April 29, when it will also release its updated monetary policy report.
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