OTTAWA--The Bank of Canada left its main interest rate unchanged at 2.25% and adopted a more alarmed tone about the upside risks to inflation amid new cross-border tariffs and no imminent end to the war in the Middle East.

Bank of Canada Gov. Tiff Macklem said Wednesday that a sharp deterioration in U.S.-Canada commercial ties does pose challenges for the economy, and risks stifling a nascent recovery that suggested businesses are learning to live with heightened trade-policy uncertainty.

Fresh U.S. tariffs and retaliatory duties from Canada could increase costs to consumers and pose a drag on growth in the fourth quarter, he said.

Yet, the takeaway from the central bank's statement and Macklem's remarks at a press conference point to heightened concern about inflation, which--at around 3%--remains too high for comfort and could move upward as crude-oil prices remain elevated.

"We have to keep our eye on inflation," Macklem said. "The situation in the Middle East is no closer to resolution, and the longer it goes, bigger is the chance that feeds through" to higher prices for non-energy goods.

He added that the central bank is prepared to raise rates to cool inflation, and is prepared to do so more than once if necessary.

The central bank's tone caught some economists off guard.

All economists surveyed last week by The Wall Street Journal predicted that the Bank of Canada would keep its policy rate unchanged for a seventh straight decision, and highlight the risk to growth posed by the escalation in trade friction between Washington and Ottawa. Yet the risk to inflation took center stage instead.

During Macklem's press conference, the Canadian dollar strengthened, and bond yields ticked higher. Global bond yields have risen, in part due to concerns about energy-fueled inflation and the need for central bank tightening.

The yield on a two-year Canada government bond was trading in the 3.02% range prior to the central bank's rate decision, and climbed above 3.1% during the press conference, according to data from FactSet. Pricing in the rates market indicate that traders are placing a 50-50 probability of a Canada rate increase before the end of the year, according to research firm Sibley Creek.

Central bank officials "view inflation as a greater threat to the central bank's price stability mandate than trade disruption, making it inappropriate to consider easing policy at this juncture," said Karl Schamotta, chief market strategist at global-payments firm Corpay.

Macklem said the new U.S. tariffs are expected to hit certain sectors hard but he doesn't expect them "to have a large direct impact on the overall level of economic activity."

Wednesday's decision marks the seventh straight in which Canada's central bank left its target for the overnight rate unchanged.

Optimism about a rebound surfaced after second-quarter data indicated that the economy grew by 3.3% annualized, exceeding the Bank of Canada's forecast of 2.5% expansion. Growth was broad-based, powered by exports, household consumption and business investment.

At the press conference, Macklem said the economy is on solid footing entering this contentious stage of U.S.-Canada trade ties.

Firms are "finding ways to work and manage uncertainty with their U.S. clients," the central bank governor said.

"They're diversifying their exports. They're shifting their supply chains, and you can see that you can see that in the data," he said.

Still, Macklem said new U.S. tariffs of 50% on certain Canadian goods, combined with retaliatory duties from Canada, adds another thick layer of uncertainty and poses a risk to the recent economic rebound. The central bank is set to issue an updated forecast next month, alongside its rate-policy decision.

"We would be wary of pencilling in any policy tightening just yet," said Nick Rees, head of macro research at Monex Canada, a foreign-exchange and payments firm.

He said the U.S.-Canada trend tensions has upended the growth outlook, while the central bank said labor demand remains subdued and indicators point to excess capacity in the economy.

"Absent seeing clear evidence of broadening price pressures in the data, we think the governing-council bias will be to leave rates untouched," Rees said, referring to the senior group of central bank officials tasked with setting rate policy.