Key facts
- Bank of Canada expects to significantly raise its quarterly inflation forecast this month.
- Persistently high crude oil and petroleum product prices are the reason for the inflation outlook increase.
- New forecasts will inform the Oct. 28 rate decision.
- Macklem stated the risk of broader and more persistent inflation has increased due to ongoing Middle East conflict, curtailed shipments, and refinery capacity damage.
Governor Tiff Macklem of the Bank of Canada stated on Saturday that the central bank anticipates a significant upward revision to its quarterly inflation forecast this month, driven by elevated crude oil and petroleum product prices. These updated forecasts will be crucial for the bank's upcoming interest rate decision on October 28. Macklem noted that the ongoing Middle East conflict, supply curtailments, and refinery damage have increased the risk of inflation becoming more widespread and persistent. He reaffirmed the bank's commitment to its 2% inflation target and its readiness to adjust monetary policy as necessary. While money markets have been anticipating rate increases, they are not currently pricing in a change for the October or December decisions, but expect about 100 basis points of hikes over the next year. Macklem also commented on the global economy's resilience, which is being tested by higher costs and tighter financial conditions, and highlighted the reduced fiscal space for governments.