Bank of Canada Governor Tiff Macklem said another rate increase remains possible as elevated oil prices keep inflation above target, a risk that could extend pressure on households and firms into 2027.
In prepared remarks to the House of Commons Standing Committee on Finance on Nov. 3, Macklem said Governing Council would assess rates one meeting at a time, given uncertainty about the outlook. “There could be a need to raise the policy rate further,” he said.
The possibility follows the Bank’s Oct. 28 rate increase, which lifted its overnight target by 25 basis points to 2.5%. It was the Bank’s first increase since July 2023.
Macklem said higher gasoline, diesel and heating oil prices are adding to household expenses and firms’ costs to produce and transport goods. Businesses had absorbed most of their higher input costs so far, but the Bank’s surveys and past experience indicate more of those costs may reach consumers over the coming year.
Inflation had stayed near 3% since April 2026. The Bank’s outlook puts it at about 3.5% by the end of this year, at 3% or higher for much of 2027, then moving closer to the 2% target around mid-2028.
Canada’s economy grew 3.3% in the second quarter, while recent indicators pointed to growth of about 2% in the third. The Bank expects new U.S. tariffs to weigh on activity in the final quarter of 2026. Its forecast calls for 1% growth this year, followed by about 2% in each of the next two years. The Bank’s next rate announcement is scheduled for Dec. 9 at 9:45 a.m. ET.
