Bank of Canada Governor Tiff Macklem has cautioned that sustained high global energy prices could negatively impact Canada’s inflation outlook. Speaking at the International Monetary Fund meetings in Bangkok on Saturday, Macklem noted that while the global economy has shown resilience despite ongoing conflicts in Iran and Ukraine, as well as trade disruptions and rising borrowing costs, this resilience is increasingly under strain.
The governor highlighted that the Middle East conflict, particularly Houthi attacks on Saudi Arabia and disruptions in the Strait of Hormuz, is driving up energy prices with no immediate relief in sight. This, in turn, is affecting domestic prices for gasoline, diesel, and heating oil in Canada. Macklem expects the inflation outlook to be 'quite a bit higher' than the central bank’s previous forecast in July, which had projected inflation cooling to around 2.5% in the second half of 2026.
The Bank of Canada will release updated economic and inflation forecasts alongside its interest rate decision on October 28. Macklem indicated that the central bank is prepared to raise interest rates if inflationary pressures persist. Despite economic headwinds, including U.S. tariffs and global instability, Macklem expressed confidence in Canada’s stability and investment recovery.