TL;dr: Tiff Macklem told reporters on Saturday that the Bank of Canada will raise its quarterly inflation forecast significantly this month because oil prices are staying high, and that the new forecasts feed straight into the October 28 rate decision. Markets are pricing no move on the 28th or in December, but about 100 basis points of hikes through next year. If you have a renewal coming up, that priced path is the number to plan around, not today's rate.

What he actually said is worth reading in full, because he stated the committee's decision rule out loud. On a call from Bangkok, Macklem said the question for October 28 is whether inflation is likely to come back down toward target on its own, or whether the Bank will have to raise rates to nudge the path back. He also said the risk that inflation broadens and becomes more persistent has gone up, with the Middle East conflict ongoing, shipments curtailed, and refinery capacity damaged. That is a governor telling you what would change his mind, which is more useful than any single forecast number.

Here is how I read a forecast revision as a practitioner. The decision on the 28th tells you today's rate, which you already know. The revision tells you the committee's reaction function, which is what actually moves your renewal. When the Bank raises its inflation forecast significantly and simultaneously flags broadening risk, it is telling you the bar for hiking has gotten lower, and the press conference tells you how close they are to that bar. You do not need to predict the decision. You need to know which data would push them, and then watch that data.

There are really two scenarios from here, and the October Monetary Policy Report will tell you which one the Bank sees. In the first, the oil shock stays contained in energy prices, headline inflation runs hot for a few quarters, and it fades without the Bank having to do anything, which is the outcome markets are currently pricing for the next two meetings. In the second, higher fuel costs bleed into transport, food, and then wages, expectations drift up, and the Bank hikes to get ahead of it, which is what the 100 basis points priced for next year is really about. September CPI prints tomorrow, October 19, so you get a read before the decision itself. The things to watch, in the CPI and then in the MPR, are the ones that distinguish those two paths. Core inflation measures excluding energy, wage growth, the Bank's own surveys of business and consumer expectations, and any language about the breadth of price increases. If the broadening language shows up in the core measures, the hiking scenario is live.

The practical move is simple, and it is the same discipline as any treasury forecast. Price your renewal at the market-implied path, not at today's policy rate. With 100 basis points priced through next year, that means running your numbers roughly a point above current rates and seeing whether the payment still works, because the market is telling you where the pain probably lands. If your renewal is far enough out that the path could change, that is fine, but you should know what the priced path implies today rather than discovering it at renewal time.

I keep a small tracker for exactly this, and it takes about ten minutes to set up. One tab logs every Bank of Canada decision with the policy rate, what markets had priced going in, and the inflation forecast from that meeting's MPR against what actually printed. A second tab holds your renewal date, current rate, and a row that reprices your payment at the market-implied path each quarter, so you can watch the priced pain move over time instead of guessing. Update it on decision days, which are eight times a year, and it stays current with almost no effort. The template is below with the formulas already in place. Copy it, drop in your renewal date, and you will know your number before October 28 rather than after.

Template: template: BoC decision + renewal tracker (Google Sheets, make a copy to use it)

- Francois