Bank of Canada Governor Warns of Rising Inflation Risks as Oil Shock Lingers
Bank of Canada Governor Tiff Macklem says ongoing energy supply disruptions are increasing the risk of broader, persistent inflation. With crude prices near US$100 a barrel and September CPI data due today, the central bank may face pressure to raise its overnight rate from 2.25 per cent.
Bank of Canada Governor Tiff Macklem warned on Saturday that inflation risks are rising as an oil shock lingers, with higher energy prices pushing overall inflation above the central bank’s two per cent target since May. The overall inflation rate sat at three per cent in both July and August.
Speaking to reporters from the International Monetary Fund meeting in Bangkok, Macklem said the risk of inflation broadening and becoming more persistent has increased due to ongoing conflict, curtailed shipments, and damage to refinery capacity. He noted that while the Bank of Canada has previously looked through direct oil price impacts, these compounding factors elevate the threat of wider price pressures.
Statistics Canada is scheduled to release September’s Consumer Price Index data today, providing a final look at inflation before the central bank announces its overnight interest rate later this month. Economists largely expect inflation to edge up again in September as Brent crude and West Texas Intermediate crude prices continued to hover at around US$100 per barrel.
The Bank of Canada's overnight rate currently stands at 2.25 per cent. An uptick in consumer prices could pressure the bank to raise it for the first time in a year.