By Promit Mukherjee
OTTAWA, Oct 17 (Reuters) – The Bank of Canada expects to raise its quarterly inflation forecast significantly this month owing to persistently high crude oil and petroleum product prices, Governor Tiff Macklem said on Saturday.
New quarterly inflation and growth forecasts will feed into the BoC’s rate decision on October 28.
“With the (Middle East) conflict ongoing, shipments still curtailed and refinery capacity damage, the risk that inflation broadens and becomes more persistent has gone up,” Macklem told journalists on a conference call from Bangkok.
“Our beacon is our 2% inflation target, and we are committed to keeping inflation close to target over time. We are prepared to adjust monetary policy as needed.”
Money market expectations of an increase in rates have been growing in the last few months but, as of Saturday, markets were not pricing in any change on October 28 or at the bank’s last monetary policy decision of the year in December.
However, they are pricing in increases of 100 basis points over the course of next year.
Macklem said the global economy had shown resilience despite the conflict in the Middle East and the Russia-Ukraine war, but that resilience was being tested by higher costs and tighter financial conditions.
He said governments also had less fiscal room to maneuver and needed to adjust their policies to rebuild that capacity.
For central bankers, the main concern is to ascertain whether higher oil and product prices will spill over into the broader economy.
Speaking about the decision to be made on October 28, Macklem said: “The question we are going to be asking ourselves is, ‘Is inflation likely to come back down towards our target on its own, or are we going to have to raise interest rates to influence the path, nudge the path for inflation back towards the target?’.”
(Reporting by Promit Mukherjee; Editing by Kevin Liffey)



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