OTTAWA—The Bank of Canada has once again kept its key interest rate steady at 2.25 percent, but warned that economic weakness combined with higher inflation poses a “dilemma” for monetary policy.
“Raising rates to dampen inflation could further slow the economy. Easing rates to support growth increases the risk that higher inflation becomes persistent. For now, holding the policy rate unchanged balances those risks,” Bank of Canada Governor Tiff Macklem told reporters on June 10.
Macklem said that new U.S. tariffs on Canada may require the Bank to further cut the interest rate policy to support economic growth. Alternatively, if the U.S.-Iran War continues and higher energy prices begin bleeding into inflation, Macklem said there might need to be “consecutive increases in the policy rate.”…