🔴 Macklem warns Canada inflation will hit 3.5%
Bank of Canada Governor Tiff Macklem told MPs on Tuesday that more interest rate hikes may be needed, one week after the bank raised its policy rate to 2.5 per cent. He said oil prices kept high by the Middle East war will push inflation to about 3.5 per cent by year’s end, and warned business cost pass-through will grow, two days before Ottawa’s budget.
- • The Bank raised its policy rate by 25 basis points to 2.5% last week — its first increase since July 2023
- • Macklem told the finance committee more hikes may be needed, with decisions taken one meeting at a time
- • Inflation has run near 3% since April; the Bank sees about 3.5% by year-end and at or above 3% through much of 2027
- • Higher oil prices are lifting gasoline, diesel and heating-oil costs, and businesses are expected to pass more costs on
- • Macklem said Ottawa’s fiscal policy is not making the inflation fight harder — neither of his two warning tests is met
- • The testimony came two days before the Nov. 5 budget and its $36-billion productivity mega-deduction for business investment
- • BMO’s Doug Porter disagreed, saying fiscal support and rate hikes are working at cross purposes
Sources: Reuters, Bloomberg, Global News, The Canadian Press, The Wall Street Journal
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