{"id":78406,"date":"2026-09-14T17:00:56","date_gmt":"2026-09-14T17:00:56","guid":{"rendered":"https:\/\/www.pantheregroup.com\/2026\/09\/14\/odds-of-a-bank-of-canada-rate-hike-in-december-rise-with-oil-in-the-inflation-drivers-seat-say-economists\/"},"modified":"2026-09-14T17:00:56","modified_gmt":"2026-09-14T17:00:56","slug":"odds-of-a-bank-of-canada-rate-hike-in-december-rise-with-oil-in-the-inflation-drivers-seat-say-economists","status":"publish","type":"post","link":"https:\/\/www.pantheregroup.com\/2026\/09\/14\/odds-of-a-bank-of-canada-rate-hike-in-december-rise-with-oil-in-the-inflation-drivers-seat-say-economists\/","title":{"rendered":"Odds of a Bank of Canada rate hike in December rise with oil in the inflation &#039;driver&#039;s seat,&#039; say economists"},"content":{"rendered":"<p> \n<br \/><iframe loading=\"lazy\" title=\"Bank of Canada would cut rates if not for Iran war\" width=\"1080\" height=\"608\" src=\"https:\/\/www.youtube.com\/embed\/dcDYKAfsXJA?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p> Canada\u2019s annual rate of inflation in August may have remained at three per cent, but some economists say the odds of a December rate hike by the Bank of Canada have increased due to surging global oil prices . <\/p>\n<p> The price of oil has risen 15 per cent in September to top US$100 a barrel after spending the summer months between US$80 and US$85. <\/p>\n<p> Gas pump prices rose 22.8 per cent in August from a year ago, compared with 25.7 per cent in July, Statistics Canada said, keeping inflation at the top end of the Bank of Canada\u2019s target zone of one per cent to three per cent. <\/p>\n<p> Here\u2019s what economists had to say about inflation and what\u2019s next for the Bank of Canada and interest rates. <\/p>\n<h2>No comfort: Desjardins<\/h2>\n<p> \u201cWhile inflationary pressures looked relatively contained in August, Bank of Canada officials won\u2019t take much comfort with oil prices above $100 per barrel,\u201d Royce Mendes, managing director and head of macro strategy at Desjardins Group , said in a note on Monday. <\/p>\n<p> He said moderating gas prices \u201ctemporarily\u201d contained inflation in August at three per cent, matching economists\u2019 expectations. <\/p>\n<p> Excluding gas and food, the consumer price index (CPI) rose to 2.1 per cent in August from 1.9 per cent in July. The Bank of Canada\u2019s preferred measures of core inflation, CPI trim and median, came in at a 12-month rate of two per cent. <\/p>\n<p> Cooler core inflation will give the Bank of Canada some breathing space that others such as the European Central Bank, which hiked rates by 25 basis points last week after increasing them in June, don\u2019t have. <\/p>\n<p> But Mendes said if oil prices don\u2019t start falling soon, policymakers won\u2019t have any choice but to hike because rising prices for oil and gasoline will show up in other areas of the economy over the next few months. <\/p>\n<p> \u201cFor monetary policy, oil is now in the driver\u2019s seat,\u201d he said. <\/p>\n<h2>\u2018Odds rise\u2019: RSM Canada<\/h2>\n<p> \u201cThe odds of a hike in December rose slightly,\u201d Tu Nguyen, an economist at RSM Canada LLP, said in a note, adding that the longer the war in Iran lasts, the more likely inflation will break out beyond the gas pumps. <\/p>\n<p> \u201cThe Bank of Canada cannot control energy prices,\u201d he said. <\/p>\n<p> RSM expects annual inflation to accelerate past three per cent in September, though core measures will be held in check by tamer home prices and food. <\/p>\n<p> Food inflation for August undershot the overall CPI for the first time since July 2024. <\/p>\n<p> RSM is calling for the Bank of Canada to hold rates at 2.25 per cent for the remainder of 2026 before hiking in the first quarter of 2027. <\/p>\n<h2>Labour slack persists: Normura<\/h2>\n<p> \u201cUnderlying price pressures remained contained,\u201d Ruchir Sharma, an economist at Normura Securities International, said in a note. <\/p>\n<p> The Bank of Canada\u2019s preferred core inflation measures of trim and median averaged 1.95 per cent year over year in August, the same as July, while the number of categories in the CPI basket that rose to or higher than three per cent remained \u201cbenign,\u201d he said. <\/p>\n<p> Shelter inflation also rose, but stayed under two per cent, while goods inflation posed no threat, he said, citing the cooling food CPI. <\/p>\n<p> \u201cWith underlying price pressures contained and labour market slack persisting, we continue to expect the Bank of Canada to remain on hold through 2026,\u201d Sharma said. <\/p>\n<h2>Will follow other central banks: Capital Economics<\/h2>\n<p> \u201cIt now looks increasingly likely the Bank of Canada will follow other major central banks in hiking rates this year,\u201d Bradley Saunders, North America economist at Capital Economics Ltd. , said in a note, citing a second straight monthly increase in core inflation along with surging oil prices. <\/p>\n<p> Policymakers\u2019 preferred inflation measures of CPI trim and median have risen to 2.7 per cent annualized over the past two months, he said, due to rising shelter prices, mortgage costs, airfares and travel tours. <\/p>\n<p> \u201cWith the Bank of Canada sounding more hawkish at its recent meeting, it is looking increasingly likely that a rate hike is enacted before the year is out,\u201d he said. <\/p>\n<h2>\u2018Behind the curve\u2019: Bank of Nova Scotia<\/h2>\n<p> \u201cThe Bank of Canada is behind the curve in fighting inflation. Again,\u201d Derek Holt, vice-president and head of capital markets economics at Bank of Nova Scotia , said in a note. <\/p>\n<p> He said several measures of core inflation already sit well above policymakers\u2019 two per cent inflation target on a month-over-month seasonally adjusted annual rate, including trimmed mean CPI at 3.9 per cent, weighted median at 2.7 per cent and CPI excluding food and energy at 2.8 per cent. <\/p>\n<p> Holt said those numbers make the case for an interest rate increase at the central bank\u2019s meeting on Oct. 28. <\/p>\n<p> \u201cYou shouldn\u2019t be hanging around the low end of neutral with a real policy rate around zero if not negative when all of your inflation gauges are on or above target,\u201d he said. <\/p>\n<p> The Bank of Canada\u2019s neutral range, where the economy is neither held back nor stimulated, is 2.25 per cent to 3.25 per cent. <\/p>\n<p> <em>\u2022 Email: gmvsuhanic@postmedia.com <\/em> <\/p>\n<p><iframe loading=\"lazy\" title=\"China wild card in global energy crisis\" width=\"1080\" height=\"608\" src=\"https:\/\/www.youtube.com\/embed\/1q5gT6gq5mM?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><br \/>\n<br \/>\n<br \/>Odds of a Bank of Canada rate hike in December rise with oil in the inflation &#039;driver&#039;s seat,&#039; say economists<\/a><br \/>\n<br \/>2026-09-14 17:00:56<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Canada\u2019s annual rate of inflation in August may have remained at three per cent, but some economists say the odds of a December rate hike by the Bank of Canada&#8230;<\/p>\n","protected":false},"author":2,"featured_media":78407,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":["post-78406","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy"],"_links":{"self":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/78406","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/comments?post=78406"}],"version-history":[{"count":0,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/78406\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media\/78407"}],"wp:attachment":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media?parent=78406"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/categories?post=78406"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/tags?post=78406"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}