Bank of Canada expected to hold rates steady Wednesday amid volatile global economic data
Economists expect the central bank to keep borrowing rates at 2.25 per cent as U.S. tariffs and Middle East tensions create conflicting pressures on growth and inflation.
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The Bank of Canada is set to announce its fifth interest rate decision of the year on Wednesday, with most economists expecting policymakers to leave the key borrowing rate unchanged at 2.25 per cent. The central bank has been navigating competing pressures from U.S. tariffs and Middle East tensions that threaten both economic growth and price stability.
Inflation spiked to 3.2 per cent in May as the Iran-U.S. conflict and shuttered Strait of Hormuz disrupted global energy markets — the highest rate since late 2023. Though global oil prices eased after a ceasefire agreement in mid-June, hostilities reignited last week, casting doubt over a lasting peace deal.
Bank of Canada governor Tiff Macklem said the bank will look through the short-term rise in inflation tied to the Middle East conflict. What officials are more worried about is whether that inflation bout spreads to other areas of consumer spending. Statistics Canada's April GDP report showed the economy bouncing back from a first-quarter contraction, with real GDP rising 0.5 per cent in April, and early estimates suggest May growth continued. The labour market has also stabilized after sharp losses earlier in the year.
By the numbers
What is the Bank of Canada's current key borrowing rate?
The Bank of Canada's key borrowing rate is 2.25 per cent.
What was Canada's inflation rate in May?
Inflation in Canada reached 3.2 per cent in May, the highest rate since late 2023.
How much did real GDP rise in April?
Real GDP rose 0.5 per cent in April according to Statistics Canada's April GDP report.
