Oil Price Surge Sparks Global Rate Expectations - Except in Canada

Oil prices have surged over 30% since July, sending shockwaves through global financial markets.

National Bank of Canada notes that this rebound is having a more significant impact on interest-rate expectations in other regions, particularly the UK and eurozone, where traders are pricing in full rate hikes from both the Bank of England and European Central Bank.

However, the bank estimates that expectations for the Bank of Canada's policy rate in December 2026 have only risen by five basis points, with markets still predicting that the central bank will maintain its current hold through at least October before raising rates in early 2027.

This difference is largely due to Canada's unique economic circumstances, where higher oil prices can offset imported inflation and strengthen the Canadian dollar.