Rising uncertainty has called the sustainability of the economy's rebound into question
The Bank of Canada on Wednesday held its key interest rate at 2.25 per cent for the seventh consecutive time, which was widely expected by economists due to the ongoing uncertainty from rising trade tensions and renewed hostilities in the war on Iran.
Create an account or sign in to continue with your reading experience.
Create an account or sign in to continue with your reading experience.
The central bank said recent data reaffirm a “broadening recovery” in Canada’s economy and that second-quarter growth was broadly in line with July expectations, but the risks of higher and persistent inflation have increased.
Renewed hostilities in the Middle East have pushed Canada’s inflation rate to three per cent in July. New U.S. Section 338 tariffs and Canadian counter-tariffs will also raise costs for some businesses and could feed into consumer prices over time.
By signing up you consent to receive the above newsletter from Postmedia Network Inc.
A welcome email is on its way. If you don't see it, please check your junk folder.
The next issue of FP West: Energy Insider will soon be in your inbox.
We encountered an issue signing you up. Please try again
Interested in more newsletters? Browse here.
Read the Bank of Canada’s official statement
“There is still slack in the economy and the new American trade actions have increased uncertainty about how sustainable that rebound is,” Bank of Canada governor Tiff Macklem said.
“Inflation is running at three per cent. That’s too high. There’s no clear resolution (to the war in Iran) and the longer it goes on, the longer oil prices remain high and the greater the risk that higher energy prices start to spill into the prices of other goods and services.”
Macklem said the Canadian economy is in a stronger position than it was when the first round of U.S. tariffs was implemented in March 2025 and that businesses are starting to adapt to the higher tariffs by finding ways to manage uncertainty with U.S. clients, while exports have rebounded and business investment has improved over the last year.
