The Bank of Canada held its key policy rate unchanged today for a fifth straight
meeting, in line with market expectations, citing weak domestic growth while a
global oil shock is lifting inflation. Governor Macklem said weak activity
alongside rising inflation presents a policy dilemma: raising rates to curb
inflation could further slow the economy, while cutting to support growth risks
higher inflation. He reiterated that policy must remain flexible, restating
April language that major new US trade restrictions could prompt rate cuts to
support growth; conversely, a protracted Middle East conflict that pushes energy
prices and sparks sustained broad inflation could require consecutive rate
hikes.
