Bank of Canada sees sharply higher inflation outlook as oil surges, Macklem says
TLT•The Bank of Canada expects to raise its quarterly inflation forecast significantly this month as crude oil and petroleum product prices remain high. Markets were pricing in no rate change on October 28 but 100 basis points of increases over the course of next year.
1. Inflation forecast set to rise
The Bank of Canada expects to raise its quarterly inflation forecast significantly this month because crude oil and petroleum product prices have remained high, Governor Tiff Macklem said. New quarterly inflation and growth forecasts will inform the bank’s rate decision on October 28.
2. Policy risks and outlook
Macklem said the ongoing Middle East conflict, curtailed shipments and damaged refinery capacity have increased the risk that inflation broadens and persists. He said the bank remains committed to keeping inflation close to its 2% target and is prepared to adjust monetary policy as needed.
3. Markets see future increases
As of Saturday, markets were not pricing in a rate change on October 28 or at the bank’s final monetary policy decision of the year in December, but were pricing in increases totaling 100 basis points over the course of next year. Macklem said the bank will assess whether inflation is likely to return toward its target on its own or whether higher interest rates will be needed.
