Why did the Bank of Canada hold its key interest rate unchanged, and what is its stance on energy-driven inflation?

The Bank of Canada held its key policy rate unchanged at 2.25% for the fifth consecutive meeting because it found 'limited evidence of broad-based pass-through of higher energy prices to other consumer prices' and is 'continuing to look through the war's near-term impact on headline inflation' while remaining vigilant that 'higher energy prices [do not] become persistent inflation'. Governor Tiff Macklem emphasized the bank would 'not hesitate to raise rates if need be' to keep inflation in check, and explicitly stated that 'holding the policy rate unchanged balances those risks' posed by the U.S.-backed war with Iran — namely, that raising rates could further slow the economy, while cutting them could entrench higher inflation.

What are the Bank of Canada’s conditions for future rate hikes or cuts, according to Governor Macklem?

Governor Macklem outlined two clear conditional scenarios: first, if higher energy prices begin driving 'generalized inflation', then 'there may be a need for consecutive rises in the policy rate'; second, if the United States imposes 'significant new trade restrictions on Canada' — particularly amid the upcoming review of the USMCA — the Bank 'might have to cut rates'. These statements reflect the bank’s data-dependent, risk-balanced approach, where policy decisions hinge on whether inflationary pressures broaden beyond energy or whether external shocks severely threaten economic growth.