Bank of Canada Holds Rate at 2.25% and Flags Trade and War Uncertainties

The Bank of Canada held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%, opting to keep policy steady as it assesses a cloudy outlook. The central bank characterised the Canadian economy as weak but showing signs of improvement, suggesting that earlier headwinds may be starting to ease even as growth remains subdued. Officials pointed to two major uncertainties shaping the policy trajectory: shifting US trade policy, which carries significant implications for a Canadian economy heavily reliant on exports to its southern neighbour, and the Middle East conflict, which has pushed up oil prices and added to global volatility. Holding rates steady gives policymakers time to gauge how these forces feed through to inflation and activity before adjusting course. For households, the decision means borrowing costs on variable-rate mortgages and loans remain unchanged for now, offering stability but little immediate relief for those hoping for lower rates. The central bank signalled it would remain data-dependent, ready to respond as the effects of trade tensions and higher energy prices become clearer, while continuing to monitor the resilience of households, businesses and the broader financial system.