The Bank of Canada held its benchmark interest rate steady on Wednesday, but warned that interest rates may need to change depending on the duration of the oil price shock and the outcome of trade talks with the United States and Mexico. 

As widely expected, the bank’s governing council kept its policy rate at 2.25 per cent for the fourth consecutive time, even as the conflict in the Middle East has pushed energy prices sharply higher and squeezed Canadian consumers at the gas pump. 

Governor Tiff Macklem said his team decided to “look through” the energy price shock in the near term. But he said the trajectory of monetary policy will depend to a significant degree on how long oil prices remain elevated – something that’s contingent on the outcome of peace talks between the United States and Iran.

“Our baseline forecast assumes oil prices will come down and U.S. tariffs will remain at current levels. If this holds true, a policy rate close to current settings looks appropriate,” Mr. Macklem said, according to the prepared remarks from his press conference opening statement.