Could the Bank of Canada hike interest rates before the end of 2026?
“I think given the episode we went through four years ago, they’re just incredibly concerned about the possibility of inflation lingering, even if initially it’s driven by oil prices,” he said.
“I think in general they believe that people are more sensitive to inflation now than they would have been, say, five or six years ago, and they feel they might have to react.”
Reasons for optimism from central bank’s latest announcement
For now, the Bank is keeping its powder dry as it waits to see how long the Iran war continues and whether US and Iranian negotiators can strike a ceasefire deal.
There remained no hint of progress midweek, with the US launching new strikes on Iran as President Trump warned that power plants and bridges could be targeted if an agreement wasn’t reached.
One detail from Wednesday’s announcement is reassuring for the medium-term outlook, Porter said: even with months of volatility in oil prices, the Bank has not made any significant change to its inflation forecasts for next year or the year after, signalling that policymakers still see the current pressure as transitory rather than a lasting shift.
