Bank of Canada holds interest rates: Read the official statement
Tomas Kauer 
Here’s the Bank of Canada’s official statement for its rate decision:
The Bank of Canada today held 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 2.20 per cent.
The conflict in the Middle East is now in its fourth month. The resulting increases in energy prices and disruptions in global supply chains are weighing on global economic growth and pushing up inflation. At the same time, the U.S. administration continues to propose new tariffs and trade policy uncertainty remains elevated.
In the United States, economic growth remains solid, supported by consumption and AI‑related investment. In the euro area, growth is subdued, with higher energy prices weighing on activity. China’s economic growth continues to be supported by strong exports.
Canadian financial conditions have loosened since the April Monetary Policy Report. Global equity markets have been buoyant and bond yields remain volatile. The Canadian dollar has weakened against the U.S. dollar and other currencies.
In Canada, GDP edged down by 0.1 per cent in the first quarter, weaker than expected at the time of the April MPR. Consumer spending grew 1.4 per cent but government spending unexpectedly declined. Housing activity also declined and business investment remained weak. Exports fell while imports rose strongly as inventories were rebuilt. Employment was up in May, but looking through monthly volatility, employment in Canada is little changed since the start of the year. The unemployment rate continues to fluctuate in the 6.5 per cent- seven per cent range with the most recent reading at 6.6 per cent in May.
Recent data suggests that growth will resume in the second quarter but, even with some rebound, the economy is expected to remain in excess supply.
As expected, CPI inflation rose in April, reaching 2.8 per cent. The increase reflects energy prices, both higher oil prices and the impact of the elimination of the consumer carbon tax falling out of the 12-month rate of inflation. So far, there has been limited evidence of broad-based pass-through of higher energy prices to other consumer prices. Measures of core inflation have moved down to around two per cent and the share of CPI components growing above three per cent is close to its historical average. Food price inflation moderated but remains high, and shelter inflation continued to slow. With global oil prices still elevated—roughly $10 a barrel above our April MPR assumptions—total inflation is expected to hover around three per cent in the near term before easing gradually towards two per cent.
Against this overall backdrop, Governing Council decided to maintain the policy rate at 2.25 per cent. Economic activity in Canada has been weak and uncertainty about U.S. trade policy persists. The conflict in the Middle East is ongoing and oil prices remain elevated. Governing Council is continuing to look through the war’s near-term impact on headline inflation, but will not let higher energy prices become persistent inflation. As the outlook evolves, we stand ready to respond as needed. The Bank is committed to maintaining Canadians’ confidence in price stability through this period of global upheaval.
