The Bank of Canada is considering further interest rate hikes but is moving cautiously, according to a summary of its recent meeting released Tuesday. The governing council acknowledged significant uncertainty surrounding factors like the war in the Middle East, Canada-U.S. trade relations, and global financial conditions. Members emphasized that they would approach monetary policy decisions one meeting at a time, taking these uncertainties into account.
The central bank raised its policy interest rate by a quarter of a percentage point to 2.5% last month to combat the risk of persistent inflation driven by high oil prices. While the bank has stated it would overlook the immediate impact of the Middle East conflict on inflation, it remains vigilant against broader inflationary pressures. The summary noted that council members discussed whether a higher rate was necessary to prevent energy costs from spreading to other goods and services.
The Bank of Canada also revised its outlook, predicting the annual inflation rate to hit 3.5% by the end of this year and stay above 3% for much of 2027. Although higher costs have not yet been passed on to consumers, business surveys indicate plans to raise prices over the next year. The next interest rate decision is scheduled for December 9.