Bank of Canada Sets Rate-Hike Test in Inflation Basket

The Bank of Canada has set a condition that could lead to another interest-rate hike. According to the latest minutes, gasoline and diesel costs must start spreading into the rest of the inflation basket for this to happen.

Canada's total CPI inflation was 3.0% in August, at the top of the Bank's 1%, 3% control range. However, its two preferred core measures were much calmer: CPI-trim was 1.9% and CPI-median was 2.0%, according to the Bank's September 17 Daily Digest.

The minutes do not promise a hike, but describe a central bank holding its policy rate at 2.25%. Two risks are pulling in opposite directions: persistent energy inflation could broaden, but U.S. tariffs and a still-soft labor market could weaken demand enough to contain it.