OTTAWA, June 10 (Xinhua) -- The Bank of Canada on Wednesday left its policy rate unchanged at 2.25 percent.
Bank Governor Tiff Macklem said at a press conference that economic weakness combined with rising inflation presents a dilemma for monetary policy.
Raising rates to curb inflation could further slow the economy, while lowering rates to support growth increases the risk of a persistently higher inflation. Keeping the policy rate unchanged balances those risks, he said.
"However, uncertainty is unusually elevated, and the risks could shift. Monetary policy may need to be nimble," Macklem said.
He said if the United States imposes significant new trade restrictions on Canada, the central bank may need to cut the policy rate further to support economic growth.
If conflict in the Middle East persists and higher energy prices begin feeding into broader inflation, consecutive increases in the policy rate may be needed, Macklem added.
According to a Bank of Canada news release, economic activity in Canada has remained weak.
Gross domestic product edged down by 0.1 percent in the first quarter, weaker than expected, the release said. Consumer price index inflation rose to 2.8 percent in April and is expected to remain around 3 percent in the near term before gradually easing toward the bank's 2 percent target.
