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 revise its inflation forecast higher at its upcoming October 28 rate announcement, with Brent crude now at ~US$110 versus the July forecast of ~US$75 average for Q3 and WTI at US$101.
- Macklem said that if oil stays around US$100, inflation will 'gradually drift up' from the current 3% — and the BoC may need to raise rates to nudge inflation back toward its 2% target if it doesn't return on its own.
- The Bank of Canada has held its benchmark rate at 2.25% for seven consecutive decisions, but Bloomberg data shows financial markets pricing a ~35% chance of a quarter-point hike on Oct. 28 and a 95% chance at the Dec. 9 decision.
- Refined petroleum products like diesel and gasoline have spiked due to Strait of Hormuz tanker-traffic closures and damage to refineries in Russia and Ukraine, while Macklem warned strategic oil reserves globally are being run down — including China's.
- Macklem flagged that the U.S. Federal Reserve and European Central Bank have already begun raising rates in response to the same energy price shock, while Canada's oil-driven inflation was named the BoC's main concern at the September decision.
- Statistics Canada will release September inflation data on Monday alongside the BoC's quarterly business and consumer surveys — the last two major data inputs before the Oct. 28 announcement.
- Macklem warned at the IMF meeting that sovereign debt risks, AI boom sustainability, and energy price volatility are 'getting a bit more intertwined,' with potential implications for equity and debt markets.
Why it matters: Canadian borrowers face a sharply rising probability of a rate hike before year-end — markets jumped from 35% odds in October to 95% in December after Macklem's comments, meaning variable-rate mortgage holders and anyone refinancing in early 2026 should brace for higher borrowing costs tied directly to oil-driven inflation rather than domestic economic strength.
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