Bank of Canada anticipates higher inflation outlook amid surging oil prices

The Bank of Canada is preparing to raise its quarterly inflation forecast due to rising crude oil and petroleum product prices. Governor Tiff Macklem noted that ongoing conflicts in the Middle East, combined with curtailed shipments and refinery capacity damage, have increased the risk of inflation becoming more persistent.

While markets are currently not pricing in immediate rate changes for the October 28 decision, expectations for a 100 basis point increase over the next year are growing. Macklem emphasized the central bank's commitment to its 2% inflation target and stated they are prepared to adjust monetary policy if inflation does not return to target on its own.

Separately, Royal Bank of Canada (RBC) strategists expect Canada’s headline Consumer Price Index to remain at 3% year-over-year in September, driven by higher gasoline and furnace oil prices. RBC anticipates core inflation, which excludes food and energy, will edge down to 1.8% from 2.1% in August, though they are monitoring transportation categories for potential price pass-through risks.