Macklem Warns of Persistent High Fuel Margins and Rising Inflation Risks

Bank of Canada Governor Tiff Macklem expressed concerns about higher fuel margins persisting in the economy, which could lead to increased inflation. This is a worry for the Bank as it may add persistence to headline inflation.

Macklem also reduced the quarterly growth forecast for Q4 to 0.75%, citing weaker economic growth and the impact of new US tariffs on Canadian investment and hiring. He noted that the economy expanded at a 3.3% annualized pace in the second quarter, but the outlook has become more uncertain.

The Bank of Canada is closely watching inflation data to determine if it needs to raise interest rates. Macklem acknowledged that elevated energy prices and wider fuel margins could push inflation higher, while weaker economic growth might reduce inflation pressure.