İstanbul
The Bank of Canada on Wednesday kept its policy rate unchanged at 2.25%, saying the Iran war and US trade policy continue to cloud the economic outlook.
The bank held its target for the overnight rate at 2.25%, while 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 bank said the Iran war has led to sharply higher energy prices and transportation disruptions, weakening growth prospects in oil-importing countries and boosting inflation worldwide.
Financial conditions have also been volatile, reflecting daily developments in the Middle East and changing expectations for inflation and interest rates, it added.
The bank expects the global economy to grow by about 3% in 2026, 2027 and 2028, while inflation projections for the next year were revised up due to the jump in energy prices.
For Canada, the growth outlook is little changed from the bank’s January projection, with gross domestic product forecast to expand 1.2% in 2026, 1.6% in 2027 and 1.7% in 2028.
Consumer and government spending are supporting economic activity, while tariffs and trade uncertainty are weighing on exports and business investment.
The consumer price index (CPI) inflation climbed to 2.4% in March due to sharply higher gasoline prices and is expected to rise further to about 3% in April.
The bank said inflation is forecast to return to the 2% target early next year, assuming oil prices ease.
“Governing Council is looking through the war’s immediate impact on inflation but will not let higher energy prices become persistent inflation,” the bank said, adding that it stands ready to respond as needed.
