Oil is no longer a clean positive for Canada, as a Bank of Canada official warn that the latest energy shock also risks fueling broader inflation rather. Senior Deputy Governor Carolyn Rogers said in a speech it is “too early to assess the impacts of the war on growth”, but made clear that higher oil prices will bring both benefits and costs.
While stronger energy prices could lift export income, Rogers emphasized that the same shock will squeeze consumers and businesses through higher costs, while tighter financial conditions and elevated uncertainty weigh on spending and investment. This highlights a growing dilemma for policymakers, where the traditional growth boost from oil is increasingly offset by demand destruction risks.
Rogers warned that the recent rise in energy prices will push inflation higher in the near term, with the key risk being second-round effects spreading into other goods and services. With the policy rate held at 2.25% last week, the BoC is in a wait-and-see mode but stands ready to respond.
