Minutes from the Bank of Canada’s most recent policy meeting show that the central bank is proceeding carefully when it comes to raising interest rates.
Policymakers at the Bank of Canada agree that more rate hikes are needed to lower inflation but they plan to proceed carefully because of uncertainty related to U.S. tariffs and the Iran war.
The latest meeting minutes have been released after the Bank of Canada in October raised its trendsetting overnight interest rate for the first time since 2023.
The central bank increased the interest rate by 25 basis points to 2.50%. At the time, Bank of Canada Governor Tiff Macklem said the inflation outlook had been revised upward.
Inflation in Canada is now forecast to top 3.5% by the end of 2026 and remain above 3% throughout 2027.
The minutes also show growing concerns about rising energy prices due to the Iran war, which have pushed Canada's overall inflation rate higher in recent months.
Officials at the central bank feel that the longer energy prices stay high, the bigger the risk of it becoming broad-based and persistent inflation.
“With the war in its eighth month and no resolution on the horizon, members exchanged views on whether a higher policy interest rate was needed to mitigate the risk that higher energy costs would spread to other goods and services,” read the minutes.
The Bank of Canada next decides on interest rates Dec. 9, which will be its final meeting of the year.
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