Bank of Canada Keeps Rates on Hold, as Expected; May Need to Cut Rate If U.S. Sets "Significant" New Trade Restrictions

10:06 AM EDT, 06/10/2026 (MT Newswires) -- The Bank of Canada kept its rates unchanged on Wednesday, including the key overnight rate at 2.25%, as expected, continuing to look through the Iran war's immediate impact on inflation and conflicting economic data.

This is the fifth consecutive decision to maintain rates on hold.

Since the BoC's April policy decision, the economic impact of the ongoing conflict in the Middle East has increased, wrote the central bank in its statement. Higher energy prices and disruptions in global supply chains are weighing on global growth and pushing up inflation. At the same time, the United States administration continues to propose new tariffs and trade policy uncertainty remains elevated.

Against this backdrop, the Canadian economy has remained soft and inflation has increased. The BoC noted it expects the economy to remain in excess supply.

The central bank predicts consumer price index inflation to hover close to 3% in the coming months before easing gradually toward 2%. The BoC reiterated it's committed to keeping inflation close to the 2% target over time.

Uncertainty is unusually elevated, and the risks could shift, said Governor Tiff Macklem in his press conference opening statement published with the policy decision. Monetary policy may need to be "nimble," added the governor.

If the U.S. imposes "significant" new trade restrictions on Canada, Macklem said the BoC may need to cut the policy rate further to support economic growth. Alternatively, if the conflict in the Middle East continues and higher energy prices start leading to ongoing generalized inflation, monetary policy will have more work to do -- there may be a need for consecutive increases in the policy rate.

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