Updated

Updated · Convenience Store News Canada · Jul 16

Bank of Canada Sees 4.3% Food Inflation Lasting Through 2026 as Iran War Lifts Costs

Updated

Updated · Convenience Store News Canada · Jul 16

Bank of Canada Sees 4.3% Food Inflation Lasting Through 2026 as Iran War Lifts Costs

Q: If high oil prices force its hand, how quickly is the Bank of Canada prepared to raise interest rates this year?

If high oil prices force action, the Bank of Canada has signaled it could move quickly, including with consecutive rate hikes this year. Governor Tiff Macklem has said the bank is prepared to raise rates if oil prices stay high long enough to push inflation beyond gasoline and food into a broader, more persistent pattern. The bank’s concern is not the initial energy shock itself, but whether it starts feeding through to other goods and services and lifts inflation expectations. That means the trigger is not simply expensive oil, but sustained oil-driven inflation that becomes generalized. The Bank has said monetary policy may need to be “nimble” in that scenario, and its own deliberations indicate that “consecutive increases” could be required to bring inflation back to target. For now, that is not the base case. The bank still expects inflation to ease, assuming oil prices moderate toward roughly US$70 to US$75 a barrel. Core inflation remains near 2 per cent, and most economists, including BMO’s Douglas Porter, expect the Bank to stay on hold for the rest of 2026. Markets have also scaled back expectations for tightening, though some still see better-than-even odds of one quarter-point increase this year. So the practical answer is that the Bank is not preparing an immediate hike now, but if oil stays elevated and inflation broadens, it has clearly left the door open to back-to-back increases at upcoming decisions rather than a slow, one-off response.

3 articles · Updated · Convenience Store News Canada · Jul 16

Food inflation is set to stay elevated through the second half of 2026, the Bank of Canada said, even as overall inflation is projected to slow to 2.5% after May's 3.2%.
Higher fuel and natural-gas-linked fertilizer costs from the Iran war are keeping pressure on farm inputs, with the bank warning those costs will keep feeding into food and other consumer prices.
Statistics Canada said food prices rose 4.3% year over year in May, outpacing headline inflation for a 16th straight month.
The bank held its benchmark rate at 2.25% for a sixth straight decision, saying the outlook still hinges heavily on volatile Middle East developments even as it expects the economy to rebound from a weak start to the year.