ICBA ECONOBOT: Macklem Floats Rate Hikes If Oil Inflation Sticks

TOP STORY

Macklem Floats Rate Hikes — Yes, Hikes — If Oil Inflation Sticks

Bank of Canada Governor Tiff Macklem told the House of Commons Finance Committee yesterday that if oil prices stay elevated, “there may be a need for consecutive increases in the policy rate.” CPI has already climbed from 1.8% in February to 2.4% in March, and the Bank now expects inflation to peak near 3% in April thanks to gasoline. The Bank held at 2.25% last week and projects GDP growth of just 1.2% in 2026. For BC and Alberta contractors, the signal matters: the easy-money window from the 2024–25 cutting cycle has slammed shut, and a sustained Iran-driven oil shock could push borrowing costs higher right as builders pencil in 2027 starts. Macklem also flagged the flip side — if Washington escalates tariffs, the Bank may have to cut further. Today’s trade data underscores the oil story: crude exports surged 18.9% on price spikes tied to the Strait of Hormuz disruption. Bank of Canada | Statistics Canada

THE NUMBERS — STATISTICS CANADA

Canadian International Merchandise Trade, March 2026 — Canada flipped to a $1.8B trade surplus — the first since September 2025 — as exports jumped 8.5% to $72.8B. Metals hit a record $15.3B (gold alone +37.7%) and energy products climbed to $17.1B, the highest level since September 2022. Real export volumes actually edged down 0.3%, so this is a price story, not a productivity story. The trade surplus with the U.S. widened to $7.1B. Statistics Canada

Canadian International Trade in Services, March 2026 — Services trade swung from a slight surplus to a $0.1B deficit. Imports rose 1.7% to $20.4B; exports edged up 0.5% to $20.4B. Combined goods-and-services balance still came in at a $1.7B surplus, the first in six months. Statistics Canada

FROM THE ECONOMISTS

BMO Economics — Canada Strong, Deficits Long — Robert Kavcic and Shelly Kaushik flag that Ottawa’s federal deficit has roughly doubled to ~$80B (~2.5% of GDP), driven by infrastructure, defence, and tariff-relief spending. Growth forecast: just over 1% in 2026, with the labour market weak and unemployment hovering near 7%.

WORTH WATCHING

Ottawa’s $1.5B Steel/Aluminum/Copper Backstop — Industry Minister Mélanie Joly unveiled $1B in BDC loans Monday in Vars, Ont. (zero-interest first year, $2–5M per recipient), plus a $500M Strategic Pivot Fund. Useful triage, but it doesn’t fix the underlying tariff problem still inflating BC and Alberta construction input costs.

IN BRIEF

Tariff Watch — One year of U.S. tariffs — the BoC’s April MPR estimates the trade war has shaved measurable points off Canadian growth, with construction-input costs (steel, aluminum) absorbing the brunt.

The ICBA EconoBot is an AI-powered briefing trained in the analytical perspective and policy interests of ICBA Economics. Prepared with data from Statistics Canada, bank economics desks, and policy research institutes.