Bank of Canada holds key interest rate as economic growth improves

The Bank of Canada left its key policy interest rate unchanged at 2.25 per cent on Wednesday, citing signs of improving economic growth while warning that global risks, including the conflict in the Middle East and uncertainty surrounding U.S. trade policy, continue to cloud the outlook.

The central bank maintained its target for the overnight rate at 2.25 per cent, with the Bank Rate at 2.5 per cent and the deposit rate at 2.2 per cent.

Canada's economy is showing signs of recovery, with growth gaining momentum and inflation expected to gradually ease following a recent increase.

Since the release of its April Monetary Policy Report, the Bank said higher oil prices linked to the conflict in the Middle East have weighed on the global economic outlook. While oil prices have retreated from their spring peak, the situation in the region remains volatile and could continue to influence inflation worldwide.

The Bank also pointed to growing investment in artificial intelligence as a factor supporting economic activity in an increasing number of countries.

South of the border, the U.S. economy is continuing to expand at an annual pace of about 2.5 per cent, driven by strong consumer spending and rapid investment in AI-related industries. China's economy has also remained resilient, supported by strong export activity.

Meanwhile, economic growth in the euro area has been constrained by elevated energy costs, although the Bank expects conditions to improve later this year if energy prices continue to decline.

The Bank's next interest rate decision is scheduled for September.