Bank of Canada Raises Rates to Combat Energy Inflation

Bank of Canada Governor Tiff Macklem testified before the House of Commons finance committee on November 3, 2026, defending the central bank's decision to raise the policy interest rate by 25 basis points to 2.5 per cent. This move marks the first rate increase since July 2023 and comes as Canada's inflation rate reached 3.1 per cent in September. Macklem stated the bank can no longer ignore energy price shocks driven by conflicts in the Middle East and the Russia-Ukraine war, forecasting that inflation will rise to 3.5 per cent by year-end and remain above 3 per cent through much of 2027.

During his testimony, Macklem asserted that federal fiscal policy is not hindering the central bank's efforts to control inflation, attributing current price pressures primarily to global energy shocks. This position contradicts claims from Conservative Leader Pierre Poilievre and finance critic Michael Chong, who argue that Prime Minister Mark Carney's fiscal agenda is driving up costs for Canadians. The Conservative Party of Canada has urged the government to slash spending and suspend federal fuel taxes to lower inflation.

Senior Deputy Governor Carolyn Rogers added that the rate hike was necessary to prevent supply shocks from passing through to other goods and services. While Rogers noted a productivity emergency in Canada, she highlighted promising indicators in business investment. Macklem also expressed concern over the Canada-U.S. trade relationship, noting that new U.S. levies could negatively impact economic growth.