Tiff Macklem said the Bank of Canada now expects inflation to come in “quite a bit higher” than its July outlook, after consumer prices held at 3% for two straight months.
Persistently high oil prices are driving that shift: Macklem said the Middle East war, Houthi attacks on Saudi Arabia, Gulf refining damage and the Strait of Hormuz closure leave little relief in sight.
Those global costs are feeding directly into Canadian gasoline, diesel and heating oil prices, while some buffers that helped absorb earlier shocks — including strategic oil reserve releases — are being depleted.
The Bank of Canada will update its forecasts and rate decision on Oct. 28, with Macklem signaling it could raise rates if energy-led price pressures begin spreading more broadly through the economy.
Speaking from IMF meetings in Bangkok, Macklem said the global economy has so far proved more resilient than expected, but that resilience is increasingly under strain from wars, trade disruption and higher bond yields.