Canadian Firms Absorbed Energy Costs. The Bank Expects That to Change.

Canadian borrowers did not get a new rate on Thursday, Nov. 5. Bank of Canada Governor Tiff Macklem told a Senate committee that last week’s quarter-point increase left the policy rate at 2.5%, the first increase since July 2023.

The household channel he described is energy costs, not an automatic wage gain. He said gasoline, diesel, and heating-oil prices are elevated. Consumer-price inflation has been around 3% since April and is expected to rise to about 3.5% by year-end, remain at or above 3% through much of 2027, and return close to 2% by the middle of 2028. Those paths are forecasts.

Macklem said businesses have mostly absorbed higher input costs so far, but surveys suggest more of those costs will be passed through over the next year. Unemployment has stayed around 6.5%, he said, and growth will likely slow in the fourth quarter as U.S. tariffs weigh on activity. Another increase is possible, but decisions will be made one meeting at a time.

Could Thursday’s testimony raise a Canadian bill you already pay? No new grocery, fuel, or fixed-loan price was set on Nov. 5. The warning is that more energy costs may be passed through over the next year.