Tiff Macklem says fresh trade tensions and rising oil prices cloud Canada's economic outlook
Bank of Canada governor Tiff Macklem issued a stark warning Monday that a fresh round of US tariffs and elevated global oil prices risk undoing Canada's hard-won economic recovery.
Speaking at the Halifax Partnership in Nova Scotia on September 21, Macklem said the economy had entered the summer on solid footing.
Non-energy exports rose 14.5% on an annualized basis in the second quarter of 2026, their highest level since early 2025. Business investment, meanwhile, climbed 8.8% over the same period.
Companies had adjusted supply chains and diversified export relationships, reducing dependence on the US market.
"Taken together, these developments suggest the economy entered the summer in a stronger position," Macklem said.
"Growth had resumed, investment was picking up and companies were beginning to look beyond the headwinds to opportunity."
Trade and energy pressures test Canada's economic rebound
That momentum now faces pressure from two directions. For brokers tracking how US tariff escalation is reshaping the Bank of Canada's rate path, the breakdown in Canada-US trade negotiations signals another potential pause in business investment and hiring.
If the latest duties remain in place, the Bank estimates fourth-quarter gross domestic product (GDP) growth could be roughly halved to below 1%. The affected goods represent approximately 5% of Canada's exports to the United States.
The Middle East conflict adds a second constraint. Damage to global refining capacity has driven gasoline and diesel prices higher, keeping consumer price index (CPI) inflation near 3% for several months.
If global oil prices hold near US$100 per barrel, the Bank expects inflation to edge further above target.
"The developments are pulling the economy in different directions," Macklem said.
"One creates downside risks to growth, while the other creates upside risks to inflation."
The latest Bank of Canada minutes show growing concern about energy prices, inflation risks, and trade uncertainty. Tiff Macklem of the Bank of Canada and Leslie Preston of TD Economics weigh in on the outlook.https://t.co/7EBVbT9OBI
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 18, 2026
What the rate hold means for mortgage brokers
Brokers will recall similar warnings about persistent energy inflation triggering rate hikes. CMP's reporting on whether economists now see rates heading higher sooner than expected found divergence after September 2's hold at 2.25%.
Philip Petursson, chief investment strategist at IG Wealth Management in Canada, placed the next rate hike no earlier than 2027.
Stephen Brown, chief North America economist at Capital Economics, suggested "an interest rate hike at the final meeting of the year, in December, is arguably now looking more likely" if energy prices persist.
Macklem was clear that monetary policy has limits. The central bank cannot offset tariff effects or control global energy prices.
"As these risks evolve, we are prepared to adjust monetary policy as needed," he said.
"We remain focused on keeping inflation low, stable and predictable. In an uncertain world, that's one of the most important contributions we can make to the economic well-being of all Canadians."
The Bank will introduce a new forecasting model called Prima for its October Monetary Policy Report, designed to better distinguish temporary inflation pressures from persistent ones.
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