The Bank of Canada says the Canadian economy continues to face heightened uncertainty related to U.S. trade policy and geo-political risks.

The central bank held its benchmark interest rate at 2.25 percent citing continued global unrest, particularly in light of the war in Iran.

Governor Tiff Macklem says the impact the war will have on the global Canadian economies will depend on how long the conflict lasts, and the extent to which it spreads across the Middle East.

Canadian inflation has been close to the 2 per cent target for more than a year, but rising oil prices will push inflation higher.

He says Canada’s economy is dealing with a lot, and faces even more volatility. He says the role of the Bank of Canada is to be a source of stability – supporting economic activity while ensuring that “a jump in energy prices doesn’t turn into persistent inflation.”

He warns about the potential impact if fertilizer is blocked from passing through the Strait of Hormuz.

“Oil and natural gas are not the only commodities that go through the Strait of Hormuz, other petro-chemical commodities, fertilizers in particular, go through. If they’re blocked, that will have other global impacts.”