Bank of America Revises Canadian Interest Rate Forecast Amid Rising Oil Prices

Bank of America has revised its forecast regarding the Bank of Canada's interest rate policy, abandoning its previous prediction of two additional rate cuts this year, each by 25 basis points. According to Jin10, the change is attributed to the impact of rising energy prices on the economy. Bank of America economist Carlos Capistran now anticipates that the Bank of Canada will maintain its current interest rates until 2026. The recent military conflict in the Middle East has driven up oil prices, which is expected to increase both inflation and income in Canada, a major oil exporter. Capistran estimates that a sustained 10% rise in oil prices could boost Canada's GDP growth by 0.3 percentage points and CPI growth by 0.4 percentage points over the next 12 months. Capistran also noted that he does not expect the Bank of Canada to raise interest rates, as any inflationary pressures are likely to be offset by a strong appreciation of the Canadian dollar.