Bank of Canada expected to hold interest rates amid economic uncertainty

The Bank of Canada is expected to leave its benchmark interest rate unchanged when it delivers its latest monetary policy decision on Wednesday morning.

Economists widely predict the central bank will hold the key rate at 2.25 percent for a fifth consecutive announcement as policymakers continue to assess economic uncertainty linked to the Iran conflict and trade tensions with the United States.

The Bank of Canada has largely remained cautious this year while monitoring the impact of global instability on inflation and economic growth.

Recent economic data has painted a mixed picture for the Canadian economy.

Statistics Canada reported that the economy contracted slightly in the first quarter on an annualised basis, falling short of the central bank’s earlier expectations.

At the same time, the labour market showed signs of resilience as the agency said Canada added 88,000 jobs in May, surprising analysts and partially reversing employment losses seen earlier in the year.

Inflation, however, remains a concern for policymakers as Canada’s annual inflation rate rose to 2.8 percent in April, driven in part by higher energy prices linked to tensions in the Middle East.

The increase in fuel costs has pushed up prices at petrol stations across the country and added pressure on household budgets.

Markets and economists will closely watch Wednesday’s announcement for signals on whether the central bank could consider rate cuts later this year.