Macklem says the Bank of Canada hasn't raised rates yet — but stubborn energy prices are making that harder

What Macklem said

Bank of Canada Governor Tiff Macklem said Friday that the central bank has not raised interest rates yet, but warned that persistent energy prices are narrowing the window for patience.

"We haven't raised our rates yet. We've been looking through the increase in energy prices, but the longer this goes, the harder that gets," Macklem said, according to Reuters.

The remarks sharpen the stakes for the Bank's next rate decision on Oct. 28, which arrives with a fresh quarterly forecast. The policy rate sits at 2.25%, and several major-bank economists now expect a hike.

Why energy is the problem

Canada's headline inflation has been running above the Bank's 1%-to-3% target range for three straight months, driven by fuel costs. Gasoline prices were 23% higher in August than a year earlier, and crude has been trading near $100 a barrel, according to industry reporting.

The central bank's dilemma is whether energy costs bleed into broader prices — transportation, food and manufacturing — or stay a fuel-price shock that can be looked through. Economists say Friday's comments signal that window is closing.

The governor's remarks follow hot U.S. inflation data this week, with September U.S. CPI at 3.7%, which has put a U.S. Federal Reserve hike back on the table as well.

What it means for your money

For Canadians, a rate hike would push up variable-rate mortgages and lines of credit just as households head into winter. Economists had roughly 1-in-3 odds on an Oct. 28 hike earlier this week; Friday's comments are likely to push those odds higher.

The last full data drop before the decision comes Monday, Oct. 19, when Statistics Canada releases September CPI at 8:30am ET and the Bank publishes its business and consumer surveys at 11:30am.