Bank of Canada Signals Potential Rate Hikes Amid Rising Oil Prices

The Bank of Canada kept its key policy rate at 2.25% on September 2, as widely expected, but Governor Tiff Macklem warned that policymakers might raise borrowing costs multiple times if inflation remains too high.

Oil prices caused by the Iran conflict have pushed Canada's annual inflation rate up to 3%, a level Macklem said was too high. The bank's target is 2%.

Macklem said the war has increased upside risks to the inflation outlook, given that oil prices are higher and it's unclear when they will come down. He emphasized that if policymakers felt inflation would remain too high, they were prepared to raise interest rates, potentially multiple times.