Bank of Canada holds key rate steady but warns future movements unclear

OTTAWA — The Bank of Canada held its benchmark interest rate steady at 2.25 per cent for a fourth consecutive time today as it waits for more clarity on the war in Iran and the future of U.S. tariffs.

Bank of Canada governor Tiff Macklem says in prepared remarks that there are a variety of directions the policy rate could go from here.

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Macklem says the key rate is probably at about the right levels if the economy evolves in line with the central bank’s projections, but he warns there are significant risks tied to the ongoing Middle East conflict and the upcoming review of the Canada-U.S.-Mexico agreement.

If the United States hits Canada with sharper trade restrictions in the wake of that review, Macklem says the Bank of Canada may need to cut the policy rate further to support economic growth.

But if the Iran war pushes global energy prices higher for longer, Macklem says the central bank may have to deliver a series of interest rate hikes to keep inflation under control.

The Bank of Canada’s forecast for overall growth hasn’t changed much from the central bank’s last outlook in January, and Macklem says he expects inflation will peak around three per cent in April before cooling back toward the central bank’s two per cent target by early next year.

This report by The Canadian Press was first published April 29, 2026.