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Bank of Canada to sharply raise inflation outlook as oil surges, Macklem says
Governor Tiff Macklem said the Bank of Canada expects to raise its quarterly inflation forecast significantly this month as crude oil and petroleum prices stay high; the new forecasts feed into the October 28 rate decision.
Why it matters
Bank of Canada Governor Tiff Macklem said on Saturday that the central bank expects to raise its quarterly inflation forecast significantly this month because of persistently high crude oil and petroleum product prices. The remarks, made on a conference call from Bangkok, frame how the bank is weighing the risk that oil-driven inflation spreads to the broader economy amid the Middle East conflict and the Russia-Ukraine war.
"With the (Middle East) conflict ongoing, shipments still curtailed and refinery capacity damage, the risk that inflation broadens and becomes more persistent has gone up," Macklem told journalists. The new quarterly inflation and growth forecasts will feed into the bank's October 28 rate decision.
Full report
Macklem reiterated that the bank's "beacon is our 2% inflation target," adding it is "prepared to adjust monetary policy as needed." He said the question for October 28 is whether inflation is likely to come back down toward target on its own, or whether the bank will need to raise rates to nudge the path back toward target.
As of Saturday, markets were not pricing in any change at the October 28 decision or at the bank's final decision of the year in December, but they are pricing in increases of 100 basis points over the course of next year. Macklem said the global economy had shown resilience despite the conflicts, but that resilience is being tested by higher costs and tighter financial conditions, while governments have less fiscal room to maneuver.
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