Bank of Canada continues to hold key interest rate at 2.25 per cent

The Bank of Canada announced Wednesday that the key interest rate will continue to remain unchanged at 2.25 per cent, as well as an unchanged deposit rate and overnight rate.

Canada’s central bank held its target for the deposit rate at 2.20 per cent and the overnight rate at 2.25 per cent.

This is the third consecutive time that the policy rate held steady, but expectations for the rate in the future are much less clear.

While inflation cooled to below the bank’s two per cent target in February, the bank’s governor said in prepared remarks Wednesday that the energy price surge is expected to push inflation higher in the coming months.

The bank says the war in the Middle East has increased volatility in global energy prices and financial markets, with heightened risks to the global economy and highly uncertain economic impacts.

The global economy before the start of war in Iran was on pace to grow at around 3 per cent, according to the bank, but the sharp rise in global oil and natural gas prices will likely boost global inflation in the near-term.

The bank also said global bond yields have risen, equity market prices have declined, credit spreads have widened and the Canada-U.S. dollar exchange rate has remained relatively stable.

The bank’s governing council decided to maintain the policy rate with an awareness of inflation risks going up due to higher energy prices, and recent data pointing to weaker economic activity and uncertainty.

The Bank of Canada will update its forecasts for inflation and the economy at its next interest rate decision set for April 29.

With files from The Canadian Press.

WATCH MORE: Bank of Canada holds key interest rate at 2.25%