The Bank of Canada expects to raise its quarterly inflation forecast significantly this month because crude oil and petroleum product prices remain high, Governor Tiff Macklem said. The new forecasts will feed into the bank's October 28 rate decision, while markets price no change for that meeting.
The Bank of Canada expects to raise its quarterly inflation forecast significantly this month, Governor Tiff Macklem said on Saturday. He pointed to persistently high crude oil and petroleum product prices. Reuters reported that the new quarterly inflation and growth forecasts will feed into the October 28 rate decision.
Macklem cited the ongoing Middle East conflict. According to Macklem: "the risk that inflation broadens and becomes more persistent has gone up". He spoke to journalists on a conference call from Bangkok.
He also said the bank is committed to keeping inflation close to its 2% target over time and is prepared to adjust monetary policy as needed.
Markets, however, were not pricing in any change on October 28 or at the bank's last policy decision of the year in December, as of Saturday. They are pricing in increases of 100 basis points over the course of next year. Expectations of a rate hike have been growing in recent months.
For central bankers, the main concern is whether higher oil and product prices spill over into the broader economy. Macklem framed the October 28 question this way: is inflation likely to come back down towards target on its own, or must the bank raise interest rates to influence its path.
Source: Reuters via Investing.com
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