The Bank of Canada is anticipated to keep interest rates unchanged at 2.25% for the sixth consecutive time, as lower oil prices and improved economic data ease previous policy tensions.Since February's U.S.-Iran conflict, the central bank faced a dilemma between rising inflation from high oil prices and slowing growth concerns.Recent data shows Canada's GDP rebounded 0.5% in April, trade surplus hit a four-year high in May, and unemployment dropped to 6.5% in June.

Governor Tiff Macklem emphasized that current rates provide support without risking inflation, with most economists predicting no rate changes for the next year.However, renewed geopolitical tensions in the Persian Gulf and uncertainty over U.S.-Canada trade policies, including the unresolved USMCA extension, remain risks.

The Bank will update its economic forecasts in its quarterly report, noting core inflation remains around 2% despite a temporary spike in May due to gasoline prices.While the Canadian dollar has weakened against the U.S.dollar, the central bank prioritizes inflation control over exchange rate fluctuations.