Economists See Oil Spike Costing Canada Jobs, Raising Inflation

A driver refuels a vehicle at a Mobil gas station in Montreal. Photo by Graham Hughes /Photographer: Graham Hughes/BlooArticle content(Bloomberg) — Economists are boosting their forecasts for Canadian inflation and unemployment as the war in Iran drives up oil prices and heightens global instability.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentAnalysts in a Bloomberg survey see the consumer price index rising at a 2.4% annual pace this year, up from 2.2% in last month’s survey. Unemployment is expected to average 6.7% in 2026, compared with 6.5% previously, while the economy is seen expanding 1.1%, down from 1.2%.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentThe combination of accelerating inflation, elevated unemployment and weak growth point to mounting stagflationary risks. Last week, Bank of Canada Governor Tiff Macklem called that situation a “dilemma” because both raising and lowering interest rates carry risks. Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentIn the survey, the median expectation is for the central bank to hold borrowing costs steady throughout 2026, with hikes starting in the second quarter of 2027. That outlook is increasingly divergent from markets — traders in overnight swaps see at least 50 basis points of hikes by the bank’s October meeting.Article contentEconomists see investment rising 0.8% in 2026, down from 1.3% previously. The survey of 33 economists was conducted between March 20 and 25.Article contentOfficials have held the policy rate at 2.25% since October of last year, including at their decision last week. Before oil prices jumped, the bank had been squarely focused on the structural damage posed by the US tariff dispute, saying it believed rates were at about the right level to help the economy transition while keeping a lid on inflationary pressures.Article contentOn Thursday, Senior Deputy Governor Carolyn Rogers said the central bank needs to “guard against” higher petroleum costs spreading to other goods and services and becoming “ongoing, persistent inflation.” Article contentAt the same time, Macklem has said he’d look through the near-term spike in oil prices and has emphasized the downside risks facing the economy. In a dovish set of communications, Macklem also said the central bank “would be talking about lower rates” if growth continued to deteriorate — absent the upside risk of higher energy costs.Article contentThe Bank of Canada next sets rates on April 29.Article contentTrending Meet the Canadian e-bike maker who is redefining the factory floor Electric Vehicles Posthaste: Believe it or not but home prices rose in these 11 major Canadian cities News Markets could be making the wrong call on interest rates Investor Bank of Canada better at handling supply shocks after 'difficult' inflation lesson, says deputy Economy Dad won’t talk about estate planning. How can I avoid being blindsided? FP Answers Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Meet the Canadian e-bike maker who is redefining the factory floor Electric Vehicles Posthaste: Believe it or not but home prices rose in these 11 major Canadian cities News Markets could be making the wrong call on interest rates Investor Bank of Canada better at handling supply shocks after 'difficult' inflation lesson, says deputy Economy Dad won’t talk about estate planning. How can I avoid being blindsided? FP Answers