Toronto: Canada's central bank held its key lending rate at 2.25 percent on Wednesday, its sixth consecutive hold, citing signs of economic "improvement" while warning of risks from the Middle East and uncertain US ties.
Canada's economy had sputtered over the past year, as US President Donald Trump's tariffs squeezed key sectors like auto-making, forced job losses and sent jitters across the business community.
Canada entered a technical recession earlier this year, after reporting two consecutive quarters of economic contraction.
But the Bank of Canada on Monday pointed to signs of a rebound.
"Canada's economy is showing signs of improvement," the bank said.
Bank of Canada Governor Tiff Macklem noted that while uncertainty surrounding "US trade policy continues to be a headwind, consumers have been resilient and businesses are adapting."
The conflict in the Middle East remains a key risk factor, Macklem added, with hostilities between the US and Iran resuming after a short-lived ceasefire.
The bank has said it would not over-react to energy price inflation caused by the conflict and would only move to raise rates if it saw clear evidence that elevated oil prices were bleeding into other parts of the economy.
"So far, we're not seeing broad spillovers of higher energy prices," Macklem said.
Canada's future trading relationship with the United States also remains unclear.
Trump refused on July 1 to renew the North American trade deal that is crucial to the Canadian economy, but the agreement remains in place while the parties seek to negotiate revisions.
"The two biggest risks to the (bank's) projection are still the conflict in the Middle East and our trade relationship with the United States," Macklem said.
