Canada Holds Fire on Rate Hikes as US Takes Aim at Inflation

CIBC's chief economist Avery Shenfeld argues that the Bank of Canada has room to wait before raising interest rates, unlike its US counterpart. The Fed is expected to hike by 25 basis points this week and another quarter-point in October due to fuel-cost shock from the Middle East conflict.

The conflict has pushed crude prices higher, draining strategic reserves and contributing to headline inflation bleeding into core measures. CIBC forecasts a 25-basis-point hike from the Federal Open Market Committee (FOMC) this week, followed by another quarter-point increase in October.

In contrast, Canada's core inflation measures are averaging close to the 2% target. The economy is also operating with slack after the US tariff round imposed 50% duties on Canadian exports.