Canada's Central Bank Holds Fire Amid Rising Oil Prices

According to Ethan Currie from National Bank of Canada, the Bank of Canada is likely to maintain its current interest rate stance in October despite rising oil prices and inflation risks. The market has brought forward expectations for policy tightening, with OIS pricing around four BoC hikes by June 2026.

The expected tightening bias has lingered across most advanced economies, although unevenly. In Canada, slack and trade uncertainty have pushed expected hikes further out, aside from a brief reversal after Macklem's hawkish September presser.

Policymakers remain focused on preventing second-round inflation effects, but the timing and pace of rate hikes will depend on how growth and inflation risks evolve. Currie argues that the path may be somewhat overstated relative to underlying fundamentals.