High energy prices and trade barriers push inflation above target
Bank of Canada Governor Tiff Macklem stated on September 21, 2026, that trade tensions and high energy costs have pushed inflation above the central bank's two percent target. He noted that policy cannot reverse tariffs but must manage lasting inflation risks.
Supply chains adjust to tariff barriers
Governor Tiff Macklem highlighted that Canadian businesses are actively restructuring operations in response to long-term economic forces.
Firms are reorganizing supply chains to curb exposure to tariffs, seeking alternative markets outside the United States, and accelerating investments in artificial intelligence and workforce skills.
Despite these structural disruptions, recent economic indicators show rising exports, broader growth, and higher business investment across multiple sectors.
Conditions in the domestic labour market have also shown initial signs of improvement as employers adapt to demographic changes.
However, ongoing trade uncertainty continues to weigh on business expansion plans.
Price pressures from energy and tariffs
Elevated oil and fuel prices driven by conflict in the Middle East have pushed inflation above the 2 percent target, while broken trade negotiations with the United States dampen near-term growth.
Macklem noted that monetary policy cannot directly alter fuel prices or trade barriers.
The central bank focuses on determining whether these combined supply shocks will exert persistent pressure on price stability.
“We remain focused on keeping inflation low, stable and predictable,” Macklem affirmed.
Caught between supply shocks
Macklem offers a realistic appraisal of policy limits amid geopolitical and trade headwinds.
By targeting underlying persistence rather than headline volatility, the central bank avoids overreacting to external shocks.
Yet persistent tariff friction will severely test this stance as household affordability weakens.