Bank of Canada's Macklem Threatens Rate Hikes Amid Persistent Inflation

The Bank of Canada's Governor Tiff Macklem has warned that multiple interest rate hikes may be on the table if inflation persists. The central bank has kept its policy interest rate at 2.25% since December 2025, but this patience has limits. If inflation doesn't cool down, the Bank of Canada will take action to control it.

CANADA'S CONSUMER PRICE INDEX (CPI) has been running near 3%, which is a full percentage point above the Bank's target. The primary culprit behind this inflation is energy, particularly gasoline prices that have increased due to geopolitical tensions around the Strait of Hormuz. This has dragged headline inflation higher.

Core inflation measures, which strip out volatile items like fuel and food, were sitting at approximately 2% as of July 2026. However, Governor Macklem emphasizes the risk that temporary inflation spikes become entrenched, becoming self-fulfilling expectations for businesses and consumers.