Oil, tariffs and job losses weigh on Bank of Canada's rate decision as Macklem speaks

If Macklem is pressed on policy, the Canadian dollar and short-term government bond yields are most at risk. Following the jobs data, the likelihood of an October rate hike has been sharply reduced, making any hawkish signal more surprising than a cautious one. Oil cuts both ways for Canada: higher crude benefits trade conditions and the currency, but it also fuels above-target inflation, so a sustained price move would reshape both the inflation debate and the loonie. Tariff headlines remain a second source of volatility.

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Macklem has stated that the central bank can look past an oil shock only as long as those pressures stay contained, and two consecutive months of job losses have made markets doubt that the spread will start soon enough to justify an October rate increase.

Summary:

• Macklem will participate in an IMF panel discussing AI and the global economy in Bangkok at 04:15 GMT (00:15 ET)
• The benchmark rate is 2.25%, unchanged since a reduction in October 2025
• Headline inflation exceeds the 2% target due to gasoline prices, while core inflation hovers near 2%
• The introduction of new US tariffs and back-to-back monthly job losses have dimmed the growth outlook
• Markets have reduced the probability of an October hike but still lean towards a move by December
• The next decision is 28 October, with September inflation data due on Monday

Bank of Canada Governor Tiff Macklem is scheduled to take part in a panel on artificial intelligence and the global economy at the IMF and World Bank annual meetings in Bangkok on Friday. This comes less than two weeks before the central bank's 28 October rate decision. According to the Bank’s media advisory, the session begins at 04:15 GMT (00:15 Eastern). Since the topic is AI rather than monetary policy, any remarks on interest rates would likely only emerge during Q&A.

According to the Bank of Canada, the policy rate remains at 2.25%, unchanged since a quarter-point cut in October last year. Governing Council has held rates at every meeting since. The most recent hold was on 2 September, when it stated it is prepared to adjust policy as needed.

Headline inflation is running above the 2% target, pushed higher by gasoline prices linked to the Middle East conflict and impaired refining capacity. However, core measures have remained near target, and the Bank has said it sees little evidence so far of energy costs spilling into broader prices. In a speech last month, Macklem said the Bank can look through the direct impact of higher oil costs, but only while those pressures stay contained. He added that it does not want to be too slow to respond if they broaden.

The growth outlook complicates the decision. The economy rebounded strongly in the second quarter. Yet new US tariffs following the breakdown of Canada-US trade talks have clouded the picture, and Macklem has cautioned that growth could slow sharply late this year if tariffs persist.

The labour market has also weakened. Canada shed jobs in both August and September, and the unemployment rate rose back to its level at the start of the year. This signals continued slack in the economy.

The jobs data shifted expectations. After the September report, markets cut the odds of an October hike to well below even, while still leaning towards a rate move by December. Some economists now expect the Bank to hold this month, though others had been forecasting an increase.

If Macklem is drawn on policy, three questions matter:

• Inflation risk: whether he still sees energy-driven inflation as the bigger risk, or gives more weight to the weaker jobs market.
• Tariffs: how he assesses the growth hit from US tariffs.
• October: whether he leaves the door open to a move this month. September inflation data on Monday is the next marker.