Bank of Canada rates at 2.25% as expected

Bank of Canada maintained its policy rate at 2.25% ass anticipated.The statement emphasized increased uncertainty, pointing out that a new level of risk has been introduced by the war in Iran. The Bank noted that the length of the conflict and the degree to which it has expanded throughout the Middle East would be crucial variables, even though the overall impact is still unknown.

Economic growth has lagged behind the BoC's projections since January. The Bank did point out that the current excess supply is assisting in reducing the possibility that rising energy costs may swiftly translate into more widespread inflation of goods and services. In addition, it adopted a dovish stance, recognizing that, in contrast to its January forecast, growth risks are now more likely to be negative.

Importantly, the BoC warned that it will take action if high energy prices start to create wider and longer-lasting inflation pressures, but it also indicated that it will examine the immediate inflationary effects of the dispute.

Overall, the BoC emphasized the uncertainties resulting from the energy shock while maintaining rates as anticipated. Its emphasis on averting energy-related spillovers to core inflation was expected, and how it evaluates and disseminates any such second-round consequences will be crucial moving forward.