Bank of Canada Eyes December Rate Hike Amid Inflation Risks

The Bank of Canada left interest rates unchanged at 2.25% as expected and highlighted inflationary risks, particularly from the Middle East conflict. However, Governor Macklem's press conference revealed a hawkish tone, suggesting a rate hike in December is now more likely than not.

Recent economic data showed a broad-based pick-up in activity, but new US tariffs pose risks to its sustainability. The Bank of Canada notes that if the trade dispute escalates, so will the risks.

The next Bank of Canada meeting is on October 28, where inflation forecasts will be updated. If they are updated higher, it would be a clear signal for December. A move in October is not out of the question.