* TSX down 1.87%, records worst day in two weeks
* BoC holds rates at 2.25%, opens door to hikes if required
* U.S. Fed leaves rate unchanged, warns of higher inflation (Updates to close)
By Rashika Singh and Nivedita Balu
March 18 (Reuters) – Canada’s main stock index fell on Wednesday, after the Bank of Canada and the U.S. Federal Reserve held interest rates steady and warned of higher inflation as officials took stock of the U.S.-Israel waron Iran.
The S&P/TSX Composite Index was down 1.87% at 32,312.67 points, recording its worst day in two weeks.
The BoC kept its key policy rate on hold on Wednesday as widely expected, but Governor Tiff Macklem said the central bank was ready to raise rates to prevent higher energy prices from broadening into persistent inflation.
The BoC’s comments come as global central banks weigh inflation concerns fanned by surging oil and gas prices amid the Middle East conflict, though Canada is seen as better shielded, being a net oil exporter.
In the U.S., the Federal Reserve held interest rates steady and projected higher inflation, steady unemployment and only a single reduction in borrowing costs this year.
“There is some relief that the Fed is still thinking about cutting and the Bank of Canada is not thinking about hiking (yet), but oil prices and the duration of the conflict will ultimately drive the narrative,” said Angelo Kourkafas, senior global investment strategist at Edward Jones.
“The uncertainty the Bank of Canada and the Fed are saying is worrying the markets,” he said.
The TSX’s materials index, which houses metal miners, fell 5.6% as precious metal prices dropped, briefly touching its lowest level since January 8.
Spot gold and silver slid more than 3% to a one-month low after the Fed’s decision.
Energy shares inched up 0.8% after Iranian media reported facilities in South Pars and Asaluyeh had come under attack, lifting oil prices.
Among notable movers, Boyd Group slumped 13.2% after the Canadian collision repair operator missed earnings estimates for the fourth quarter.
Alimentation Couche-Tard also missed analysts’ expectations for third-quarter revenue, falling 5.1% and weighing on the consumer staples sector, which dropped 2.2%. (Reporting by Rashika Singh; Editing by Jonathan Ananda and Chris Reese)
