Bank of Canada to Raise Inflation Forecast Over Oil Prices

Bank of Canada Governor Tiff Macklem announced that the central bank expects to significantly raise its quarterly inflation forecast this month. Speaking from an International Monetary Fund meeting in Bangkok, Macklem attributed the revision to persistently high crude oil and petroleum product prices driven by the Middle East conflict, refinery damage in Russia and Ukraine, and the closure of the Strait of Hormuz.

Macklem noted that Brent crude is trading around US$110, which is substantially higher than the bank's previous estimate of US$75. While headline inflation in Canada reached 3 per cent in August, the governor warned that prolonged energy costs increase the risk of generalized inflation.

These updated forecasts will inform the bank's interest rate decision scheduled for October 28. Macklem stated the bank is prepared to adjust monetary policy if inflation does not return to its 2 per cent target independently. He further observed that tighter financial conditions and limited fiscal room for governments are currently testing global economic resilience.