Bank of Canada’s Macklem expects higher inflation outlook as oil prices remain elevated — SkimNews
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- Tiff Macklem told reporters at the IMF meeting in Bangkok that the Bank of Canada will lift its inflation forecast at the upcoming decision, noting Brent crude trading near US$110 and WTI at US$101 — far above the bank's July projection of US$75 per barrel for the third quarter.
- Bank of Canada has held its benchmark rate at 2.25% for seven straight decisions, but Macklem said oil-driven inflation became the bank's main concern at the September meeting, with current Canadian headline inflation at 3%.
- Financial markets see roughly a 35% chance of a quarter-point hike on Oct. 28 but a 95% probability of one by the Dec. 9 decision, according to Bloomberg data, signaling traders expect the BoC to move within two months.
- The Federal Reserve and European Central Bank have already begun raising rates in response to the same energy price shock, putting the BoC behind its peers even as Macklem framed the question as whether inflation will fall back to the 2% target "on its own" or require rate hikes to "nudge the path."
- Refined petroleum products like diesel and gasoline have become significantly more expensive due to the closure of the Strait of Hormuz to tanker traffic and damage to refineries in Russia and Ukraine, Macklem said, while global strategic oil reserves are being depleted — with China's drawdowns reducing demand.
- Macklem warned that long-standing risks are now "getting more intertwined," pointing to high sovereign debt, the sustainability of the AI boom, and rising interest rates pressuring countries with weak fiscal positions as compounding threats to global resilience.
- The Houthi entry into the Middle East conflict and attacks on civilians in Saudi Arabia have escalated the situation with "no resolution in sight," Macklem said, framing energy prices as the dominant near-term inflation driver.
Why it matters: With markets pricing a 95% chance of a Bank of Canada hike by Dec. 9 versus just 35% for Oct. 28, Canadian variable-rate borrowers face near-certain higher costs within two months. The BoC, which has held at 2.25% for seven straight decisions, now trails the Fed and ECB — both already tightening into the same oil shock.
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