Bank of Canada holds interest rate at 2.25%

The Bank of Canada is holding its key interest rate steady at 2.25 per cent.

The decision keeps the Bank Rate at 2.5 per cent and the deposit rate at 2.2 per cent.

The central bank says the Canadian economy strengthened in the second quarter, with GDP growing by 3.3 per cent after very weak growth in the first three months of the year.

Consumption, housing, exports and business investment all contributed to the rebound.

The labour market has also improved in recent months, with Canada's unemployment rate edging down to 6.4 per cent in July.

But the Bank says demand for workers remains subdued and there is still excess capacity in the Canadian economy.

The decision comes as economic uncertainty remains high.

The Bank says the ongoing conflict in the Middle East is keeping energy prices elevated, while new U.S. tariffs and Canadian counter-measures are adding uncertainty to the economic outlook.

Financial conditions have also tightened since the Bank's last rate decision in July, with long-term bond yields rising in Canada and around the world.

The Bank says it will continue to monitor developments closely as it assesses the outlook for inflation and economic growth.