The Bank of Canada Holds Interest Rate at 2.25%

The Bank of Canada Holds Interest Rate at 2.25% as expected, as it tries to chart a course through global uncertainty. Some key takeaways from Governor Macklem’s statement:

• The BOC, which kept its rate at 2.25% for the fifth straight meeting, says that the economy was softer than expected in the first quarter of the year, but global oil prices are also staying higher than first thought.

• Governor Macklem stated, the BOC will keep looking through the short-term rise in inflation tied to the oil shock from the Middle East conflict, but he reiterates the central bank will act to prevent price pressures from becoming entrenched.

• Canada's overall inflation rate in April rose to 2.8% and Macklem said the bank expected it to hover around the 3% before gradually easing towards the 2% target.

• Although Canada's unemployment rate fell to a five-month low in May as hiring strengthened, Macklem said the data had been choppy, noting there had been little change since January.

• Macklem reiterated that if the United States imposed significant new trade restriction on Canada, the bank might have to cut rates. If on the other hand higher energy prices started leading to generalized inflation, "there may be a need for consecutive rises in the policy rate".

• The BOC continues to monitor all market factors and remains ready to act on when necessary.

The Bank of Canada will make its next interest rate decision on July 15th