Bank of Canada Holds Rate as US-Canada Tariff War Clouds Path

The Bank of Canada left its benchmark rate at 2.25% on Wednesday, holding steady for a seventh consecutive decision as a fresh round of U.S. tariffs and an ongoing Middle East war complicate its next move.

Governor Tiff Macklem's Governing Council kept the Bank Rate at 2.5% and the deposit rate at 2.20%, the level in place since October 2025. The bank described both the tariff standoff with Washington and the war's grip on oil prices as "fluid," language it used to explain why it isn't ready to commit to a direction.

Canada's economy grew faster than expected in the second quarter, and the bank pointed to that strength as one reason it saw no need to cut. But it also flagged rising inflation risk: persistently high oil prices tied to the Middle East conflict, plus retaliatory tariffs following the breakdown of trade talks between Ottawa and Washington, are pushing up the odds that prices overshoot the bank's 2% target rather than settle near it.

TD economist Marc Ercolao said stronger GDP growth had reduced the case for another cut, while inflation pressures remained contained enough to rule out a hike for now. Capital Economics' Stephen Brown read the same statement differently, telling clients its emphasis on inflation risk puts a rate increase on the table at the bank's final meeting of the year if oil prices stay elevated.

The Bank of Canada's next rate decision, paired with an updated Monetary Policy Report, is scheduled for October 28.