MNI BRIEF: Ukraine Fight May Add 1PP to Inflation- BOC

The Ukraine conflict could lift inflation by a full percentage point just on any sustained jump in crude oil prices, Bank of Canada Governor Tiff Macklem said Thursday, the kind of extra pressure that means a 50bp interest-rate hike can't be ruled out.

These prices are “very volatile” but “it’s pretty clear that our near-term inflation outlook is now higher,” he said. The Bank in January predicted inflation of around 5% in the first half of year and said it could slow to about 3% by yearend, and Wednesday Macklem raised the key rate to 0.5% from 0.25%.

Speaking to reporters after a speech where he laid out a base case for a deliberate path of tightening monetary policy, he also said hiking by 50bps could be justified based on where Canada's economy and inflation prospects end up. “The other side of it is that we are big exporters of many of these goods, oil obviously, wheat, potash, nickel,” Macklem said. “That will bring more income.”