Macklem says high energy prices will lift inflation outlook

Bank of Canada Governor Tiff Macklem said Saturday that persistently high global energy prices will drive up the outlook for inflation in Canada, a warning that comes 11 days before the central bank’s next interest rate decision.

Updated Oct. 17, 2026, 3 p.m. MT.

Macklem spoke to reporters in Bangkok on the sidelines of the International Monetary Fund and World Bank meetings, The Canadian Press reported. The Bank of Canada will publish updated forecasts with its Oct. 28 decision.

Canada’s annual inflation rate has been 3 per cent for two straight months, well above the bank’s 2 per cent target. In its July forecast, the bank projected inflation would cool to about 2.5 per cent in the second half of 2026. Macklem said the new outlook will be considerably higher, The Canadian Press reported.

He said the pressure is not easing soon. Strategic oil reserve releases that helped contain the price shock are being depleted, he said, and attacks by Houthi forces on Saudi Arabia, damage to Gulf refining capacity and the closure of the Strait of Hormuz leave no near-term relief in sight for oil markets.

Reuters reported that Macklem told a panel at the IMF and World Bank meetings on Friday the bank has not raised rates so far and has been looking past the energy-driven price increases. He warned that approach becomes harder to maintain the longer prices stay high. “The longer this goes, the harder that gets,” he said, according to Reuters.

The Globe and Mail also reported that Macklem expects a higher inflation outlook as oil prices remain elevated.

Macklem said the central bank is increasingly worried and is prepared to raise its policy rate if price pressures start to spread beyond energy, The Canadian Press reported. He framed the question as whether inflation will return to target on its own or whether rate increases will be needed.

The comments matter for Canadians because higher energy costs show up quickly in gasoline, diesel and home heating oil prices. They can also feed into the cost of food and goods that depend on transportation.

Statistics Canada is scheduled to release its September consumer price index on Monday. That report will show whether the 3 per cent pace held for a third month.

Economists had expected the bank to hold its key rate at 2.25 per cent on Oct. 28, as we reported on Oct. 15, though markets have kept a rate increase in view for December. Macklem’s remarks suggest the bank’s updated forecasts, rather than the rate itself, may be the bigger news at the Oct. 28 announcement.

The governor was in Bangkok as finance leaders gathered for the annual meetings. G20 finance chiefs ended their Bangkok talks without a joint statement on Oct. 15, and the IMF said this week it expects Canada to grow 1.1 per cent in 2026, as our earlier report on the fund’s outlook detailed.

Macklem also said the Canadian dollar has held steady against the U.S. dollar, reflecting both recent weakness in the U.S. currency and investor optimism about Canada. He pointed to early signs of an investment recovery and to companies adapting to tariff uncertainty, and called Canada a well-governed, good partner, The Canadian Press reported.

Via The Canadian Press, Reuters and The Globe and Mail.

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