Bank of Canada officials left the policy interest rate unchanged at 2.25% during their April meeting, concluding that current borrowing costs were appropriate for their prevailing outlook on growth and inflation.
In a summary of the discussions published on Wednesday, the central bank said officials did not rule out future changes to the policy rate. However, they noted that under the base-case economic projection, any such adjustments would probably be small.
Governor Tiff Macklem and his policy council emphasized that uncertainty around the outlook remains unusually elevated. A range of possible scenarios was examined, with particular attention paid to two external sources of risk that could require different monetary-policy responses.
First, officials considered developments in North American trade relations. They discussed multiple potential U.S. trade-policy actions that could affect Canada, including the prospect of additional tariffs on Canadian goods. Policymakers said that if new U.S. tariffs were imposed, that outcome could create conditions that would prompt cuts to the policy rate.
Second, the council reviewed the implications of the ongoing conflict in the Middle East. Delegates explored the possibility that the war could lift crude oil prices. They noted that if higher oil prices became persistent and became embedded in inflation and inflation expectations, those dynamics would point toward a need for higher interest rates.
The record of deliberations shows a variety of views among policymakers about how these two international developments might play out and how monetary policy should respond. The council reiterated that it will need to be flexible and responsive as new information arrives.
The Bank of Canada therefore maintained its rate stance for now, while flagging that future moves - either up or down - depend on how the trade environment and energy-market pressures evolve and on the way those forces affect inflation and the wider economy.
Contextual note: The policy rate decision reflects the council's judgment that current interest rates are appropriate at present, coupled with caution about a range of plausible scenarios that could tilt policy in different directions.