Bank of Canada Holds Rate at 2.25% Amid Conflict Pressures

OTTAWA — The Bank of Canada is navigating a complex economic landscape marked by conflicting pressures from the ongoing war in the Middle East, relying more on internal judgment to guide its benchmark interest rate decisions, according to a newly released summary of its governing council's deliberations.

The central bank maintained its policy rate at 2.25 percent during its March 18 meeting, as detailed in the document published Wednesday. Council members grappled with surging energy prices driven by the conflict, particularly involving Iran, which threaten to reignite inflation just as Canada's economy shows signs of weakness. Higher gasoline costs and persistent grocery price increases have raised concerns about shifting inflation expectations, especially following the post-pandemic inflationary surge.

Typically, rising inflation pressures would prompt an interest rate hike to cool demand, while subdued growth would favor cuts to stimulate activity. Governor Tiff Macklem described this tension last month as a dilemma, leaving the bank uncertain about the next move for the key rate. In the deliberations, members noted that the economy's softness could curb companies' ability to...