Macklem asks if BoC needs to hike as fuel margins stick

Bank of Canada Governor Tiff Macklem said the Governing Council’s next call is whether today’s 2.25% overnight rate is still the right setting — or whether it needs to rise — as sticky fuel costs threaten to keep headline inflation elevated even as growth cools.

In a media interview published Monday, Macklem said higher refining margins could take time to normalize and that persistence is a worry for CPI. With oil near US$100 a barrel, he expects inflation to drift a little higher in coming months; gasoline prices have run hotter than spot oil alone would imply, reflecting damage to global refining capacity.

The Bank has cut its fourth-quarter annualized growth forecast to 0.75%, roughly half what it would have been if new U.S. tariffs do not stick. Macklem said businesses are adapting, but tariffs still weigh on investment and hiring — a classic supply-shock squeeze where weaker demand could ease price pressure while energy and trade costs push the other way.

He stressed the Bank does not want to hike and restrain growth if broader inflation stays contained, and so far higher oil has not spilled widely into other goods and services. Wait too long, though, and any catch-up hike would have to be faster and larger than moving earlier — keeping October firmly live for markets.