- Governing Council deliberated two options: hold at 2.25% or hike to 2.50%
- Members agreed there “could be a need to increase the policy rate further”
- Decisions will be taken “one meeting at a time”
- Risk that high inflation persists and becomes broad-based has increased
- Higher-for-longer oil scenario from the April MPR has “unfortunately come to pass”
- Oil is about US$35 above the July MPR assumption
- Even without pass-through, the energy shock alone keeps CPI around 3% for more than a year
- CPI seen at 3.5% at the end of 2026 and above 3% through much of 2027; back to 2% by mid-2028
- Core measures remain near 2%; CPI ex-gasoline at 2.2%
- Cost pass-through limited so far, but members agreed it will eventually hit consumer prices
- Members had a “diversity of views” on the speed and extent of pass-through
- Near-term inflation expectations have moved up; longer-term expectations remain anchored
- Downside risks to inflation have diminished since July
- Some slack remains; unemployment rate around 6.5%
- Some members see the labour market as stronger than the headline numbers suggest
- 2026 growth revised up to 1%; 2% in 2027 and 2028
- Uncertainty “did not mean inaction”
It was a pre-emptive hike, and the minutes don’t hide it. Core inflation is near 2%, CPI ex-gasoline is 2.2% and unemployment is stuck around 6.5%. That’s not the profile of an economy that needs tighter policy. The Bank of Canada hiked anyway because Tiff Macklem is a general fighting the last war.
The key line is that the energy shock alone keeps CPI near 3% for more than a year, even with zero pass-through. Add in businesses telling the BOC they plan to pass on more costs and you get a central bank that has stopped looking through oil. Eight months into the war, “transitory” isn’t an argument anyone wants to make.
That said, this isn’t a central bank on autopilot. The case for holding was real, trade talks with the US have broken down and business sentiment has soured. The next move depends on oil and and that has a silver lining as it’s fallen fast. However, if core CPI ticks higher in the next two reports, December is live. If it doesn’t, they can afford to wait.
This article was written by Adam Button at investinglive.com.