BoC flags higher inflation on oil surge

Bank of Canada Governor Tiff Macklem said on October 17, 2026, that higher oil prices are now clearly supporting economic growth in Canada and will also push the central bank’s inflation outlook higher. He stated that the Bank expects to publish a significantly higher quarterly inflation forecast at the end of October, reflecting persistently elevated crude oil and petroleum product prices.

Macklem highlighted that as a net exporter of energy, Canada experiences different effects from higher oil compared with many other major economies. While stronger energy prices boost national income and activity, they also add upward pressure to consumer prices, feeding into the Bank’s inflation projections.

The new quarterly inflation and growth forecasts will feed directly into the Bank of Canada’s interest‑rate decision scheduled for October 28, 2026. Macklem’s comments indicate that the policy discussion later in the month will be informed by a materially higher inflation path than in previous projections.

As of October 17, 2026, money markets were not pricing a change in the benchmark rate at the October 28 meeting. However, pricing implied roughly 100 basis points of rate increases over the course of the following year, suggesting expectations of tighter policy as higher inflation pressures build.

Macklem said that if oil prices remain around US$100 per barrel, the Bank of Canada expects inflation to gradually drift up from its current level of 3% year‑over‑year. This scenario links the outlook for consumer prices closely to ongoing developments in global energy markets.

The central bank had held its benchmark interest rate at 2.25% for seven consecutive policy decisions prior to October 17, 2026. This steady stance now faces a test as higher energy costs filter through to inflation and growth, and as the Bank prepares updated projections that will guide upcoming rate choices.