Canada central bank holds key rate at 2.75% amid tariff jitters

Canada's central bank held its key lending rate at 2.75 per cent, saying it needed to be cautious in its monetary policy amid continued uncertainty caused by President Donald Trump's trade war.

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"With uncertainty about US tariffs still high, the Canadian economy softer but not sharply weaker, and some unexpected firmness in recent inflation data, (the bank's) Governing Council decided to hold the policy rate as we gain more information on US trade policy and its impacts," the Bank of Canada said in a statement.

Trump announced - then halted, pending negotiations - several levies on Canadian imports into the United States, while Canada hit back with counter tariffs.

He has targeted Canada's automotive, steel and aluminium sectors in particular with levies. The steel and aluminium tariffs were doubled on Wednesday to 50 per cent.

The on-and-off again trade policy has made the Bank of Canada's job of trying to maintain price stability while supporting economic growth more challenging.

Wednesday's rate pause was widely expected.

But Bank of Canada governor Tiff Macklem told a news conference that members of the governing council felt "there could be a need for a reduction in the policy rate if the economy weakens in the face of continued US tariffs and uncertainty, and cost pressures on inflation are contained." The bank noted downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.