The

Bank of Canada

could be at risk of letting

inflation

get ahead of it again, says Derek Holt, vice-president and head of capital markets economics at Bank of

Nova Scotia

.

“The (Bank of Canada) is at risk of waiting until the cat is out of the bag on inflation risk. Again,” he said in a note on Thursday, the day after policymakers held

rates at 2.25 per cent

for the third straight time.

The inflation threat comes from

oil prices

that have jumped some 40 per cent since the end of February, when the United States and Israel launched a joint attack on

Iran

. That price jump has made its way into gas pumps across Canada and the fear is that the longer the now three-week war goes, the greater the danger of inflation spreading to other areas of the economy.

The Bank of Canada, in its

statemen

t on rates, acknowledged rising oil prices, but said the effects were “contained” for the moment.

Instead, Bank of Canada governor Tiff Macklem emphasized the weakness in the economy and job market, saying it looks like first-quarter

gross domestic product

will miss the central bank’s latest estimates.

Holt said Macklem’s comments indicate policymakers will need clear signs that higher energy costs are leaching into core measures of inflation before acting on rates.

“By that time, it’s too late and that’s how they blew it the last time,” he said. “At some point, you need to know when to go off-model and impose judgment while taking a risk with imperfect information.”

Holt’s “last time” comment refers to the run-up in inflation starting in 2021 that peaked at 8.1 per cent in June 2022.

Central bankers around the world, including Macklem, assumed the inflation threat was transitory, but the Bank of Canada ultimately hiked rates nine times to five per cent from 0.25 per cent to quell inflation.

The consumer price index cooled to 1.8 per cent year over year in February from 2.3 per cent year over year in January.

Holt said he recommends “an insurance hike” if the energy shock still persists when the Bank of Canada meets in April or June.

“Deliver it with dovish/neutral guidance if you wish, but don’t leave the full adjustment until you are staring an inflation problem squarely in the face,” he said.

Despite other central banks, including the

U.S. Federal Reserve

, sidelining the threat of the oil shock, markets continue to price in rate hikes toward the end of the year, Karl Schamotta, chief market strategist at Corpay Research, said.

“Even as most central bankers have given short shrift to soaring energy prices, policy expectations have climbed sharply across most advanced economies since the war’s outbreak nearly three weeks ago, forcing interest rates higher, tightening financial conditions and triggering significant moves in currency markets,” he said in a note on Thursday.

Markets are now fully pricing in an interest rate hike as soon as September, according to data from Bloomberg, as oil prices spiked early Thursday due to an escalation in attacks against energy facilities in Iran and other Middle East countries.

However, some

 economists think the Bank of Canada would have come out more strongly in favour of a rate cut were it not for the war in Iran.

CIBC

World Markets deputy chief economist Benjamin Tal told Financial Post’s Larysa Harapyn that the Bank of Canada is doing the right thing by holding rates, citing U.S. President

Donald Trump

‘s unpredictability, among other issues.

“(Trump) can wake up tomorrow and say the war is over,” he said. “The Bank of Canada is doing the right thing. They are not committing to anything. They basically told you, ‘We don’t know at this point.’”

 

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Oil has started flowing from strategic reserves in an attempt to reduce the impact on global energy markets from the closure of the Strait of Hormuz, the International Energy Agency (IEA) said on Thursday.

Thirty IEA member countries have pledged a total of 426 million barrels of oil and oil products after Iran blocked transit through the strait, which handles about 25 per cent of the world’s seaborne oil exports.

Currently, the IEA estimates that about 10 per cent of normal traffic is getting through.

Reserves from Asia and Oceanian countries are supposed to be released first, followed by those from the Americas and Europe at the end of the month.

Oil prices have spiked by roughly 40 per cent since the closure of the strait.

“The war in the Middle East is creating the largest supply disruption in the history of the global oil market,” the IEA said in a press release, adding this is the sixth time the IEA has taken collective emergency action.

Previous collective emergency releases occurred in 1991, 2005, 2011 and twice in 2022.

  • Today’s data: Canada retail sales for January, industrial producer prices and raw materials price index for February.
  • Earnings: Canival PLC, Dayforce Inc.


  • How a Vancouver legal-tech pioneer is fending off the AI giants and pressure to move to the U.S.
  • Public-private partnership launches $1.3-billion fund to purchase unsold GTA condos
  • Mortgage rates already rising as war in Iran continues

Tax filing season officially began just over three weeks ago, and according to the latest individual income

tax return statistics

for the 2026 tax-filing season, as of March 15 the

Canada Revenue Agency

has received

5.5 million returns

, nearly all of which were filed electronically. Of the returns processed by the CRA so far, two-thirds of them claimed a refund, with the average refund being $2,000. Given that last tax filing season, nearly 32 million personal T1 returns were filed for the 2024 tax year, most of us have yet to file. Keep reading

here

for tips from Jamie Golombek to inspire you to get filing.

Interested in energy? The subscriber-only FP West: Energy Insider newsletter brings you exclusive reporting and in-depth analysis on one of the country’s most important sectors.

Sign up here.

Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@postmedia.com with your contact info and the gist of your problem and we’ll find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course).

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s

Financial Post column

can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his

mortgage rate page

for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s

YouTube channel

for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff and Bloomberg.

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