Despite the war in Iran and U.S. trade policy continuing to cause volatility worldwide, the Bank of Canada is holding firm on its key lending rate.
It announced on Wednesday morning that the overnight rate will remain at 2.25 per cent, with the bank rate at 2.5 per cent, and the deposit rate at 2.2 per cent.
"The Iran war has led to sharply higher energy prices and transportation disruptions, diminishing growth prospects in oil-importing countries and boosting inflation worldwide," read the Bank of Canada's statement.
Growth in the U.S. economy, boosted by investment in artificial intelligence and consumption, is expected to remain solid. The Chinese economy is supported by robust exports, and in Europe, the increased cost of oil and natural gas is weighing on economic activity.
The global economy is expected to grow by 3 per cent this year, next year, and in 2028.
In Canada, the economic outlook hasn't changed much from January. After a contraction in the fourth quarter of 2025, growth is expected to resume in early 2026.
Consumer and government spending support economic activity, while trade uncertainty holds down exports and business investment. Slow population growth subdued housing activity in the fourth quarter, and the labour market is soft, although the unemployment rate remains in the 6.5 to 7 per cent range.
Gross Domestic Product is expected to increase 1.2 per cent this year, rising to 1.6 per cent next year, and 1.7 per cent in 2028.
Inflation was 2.4 per cent in March, largely because of higher gas prices. The Bank anticipates inflation to climb to 3 per cent in April.
The next scheduled Bank of Canada rate announcement is on July 15.
