Canada Economists Boost Inflation Forecasts as Oil Prices Surge

Economists in Canada are revising their inflation forecasts upward, predicting that prices won't return to the Bank of Canada's 2% target until the third quarter of next year. According to a Bloomberg survey, analysts see the consumer price index averaging 3% over the next six months, which is 0.6 percentage points higher than in last month's survey.

The higher inflation forecast coincides with rising oil prices due to the conflict in the Middle East, which has caused Bank of Canada Governor Tiff Macklem to warn that persistently elevated gasoline prices are likely to keep headline inflation above target and increase the risk that price pressures spread more broadly.

Economists don't expect the bank to raise interest rates from the current 2.25% until its June meeting next year, which is at odds with market pricing. The probability of a recession has also increased, with economists putting it at 30%. Statistics Canada will release inflation data on October 19.