Bank of Canada council flags elevated inflation risk from oil, Iran conflict
Governing council members said gasoline prices remain high and trade uncertainty has clouded the growth outlook since July
Published
The Bank of Canada's governing council agreed that near-term inflation is likely to stay elevated, pointing to persistently high gasoline prices and to the conflict involving Iran, which it said has lifted market expectations for oil prices. Members said the main risks flagged in July's economic forecast have grown more acute, and that broader trade uncertainty has made the path for growth harder to read.
The council did not commit to a rate path. It said policy would continue to be guided by the bank's inflation forecast and the risks around it.
The scale of the conflict's economic toll is starting to show elsewhere. European Commission president Ursula von der Leyen has said the war has added €90bn to the European Union's fossil fuel import bill, though she did not specify over what period. In the United States, the Congressional Budget Office has put the five-month cost of the conflict at $38bn and raised its inflation forecast for early 2027 by half a percentage point. This week a US-contracted vessel was struck in an Iranian attack, part of a continuing run of strikes on commercial shipping that US officials expect to persist until after the midterm elections.
For markets, the council's acknowledgment that geopolitical oil risk has become more acute confirms what prices already reflect: the inflation pressure from the conflict is real and unlikely to fade quickly. Its decision to stick with the inflation forecast rather than signal cuts keeps policy flexible, but it leaves the near-term outlook exactly where it was.