File photo used for representation only
Ottawa: Canada's central bank on Wednesday held its key lending rate at 2.75 percent, saying it needed to be cautious in its monetary policy amid continued uncertainty caused by President Donald Trump's trade war.
"With uncertainty about US tariffs still high, the Canadian economy softer but not sharply weaker, and some unexpected firmness in recent inflation data, (the bank's) Governing Council decided to hold the policy rate as we gain more information on US trade policy and its impacts," the Bank of Canada said in a statement.
The bank noted downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.
Wednesday's rate pause was widely expected.
Going forward, the central bank said it would be "proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy."
It had initially paused interest rates at its previous meeting in April, following seven consecutive rate cuts since last summer that had considerably lowered borrowing costs.
Inflation eased that month to 1.7 percent, while economic growth in the first quarter came in at 2.2 percent -- stronger than the bank had forecast, but it was predicted to be weaker in the second quarter as a surge in exports to get ahead of the US tariffs subsides.
The Bank of Canada noted that the Trump administration continues to "increase and decrease various tariffs."
The United States has started trade negotiations with several countries including Canada, but "the outcome of these negotiations are highly uncertain" and "new trade actions are still being threatened," it said.
