Macklem Warns Inflation Risks Rise Amid War in Middle East, Trade Tensions

Bank of Canada Governor Tiff Macklem warned that inflation risks are rising due to higher fuel costs and new U.S. tariffs. Speaking after the central bank held its benchmark interest rate steady at 2.25 per cent, Macklem noted that the conflict in the Middle East is a major concern, with oil prices up 13 per cent since July.

The Bank of Canada has been on hold since December 2025, and this latest announcement marks seven consecutive times it has left its trend-setting policy rate unchanged. The central bank cited recent data confirming a broadening recovery in the economy, but also mentioned the war in the Middle East as a risk factor for higher inflation.

Macklem stated that U.S.-led tariffs on Canadian goods and Canada's dollar-for-dollar counter-tariffs will add costs for some businesses. He emphasized that the bigger issue is the ongoing conflict in the Middle East, which has resulted in slower tanker traffic through the Strait of Hormuz and higher oil prices.