From Bank of Canada Governor Tiff Macklem:There could be a need to raise the policy rate furtherWill proceed carefully given uncertaintiesDecisions will be taken one meeting at a timeOutlook for inflation has deterioratedHike needed to reduce risk elevated energy prices become generalized inflationLess scope for monetary accommodationCost pass-through expected to increase over the next yearGrowth outlook has improved modestly despite US trade actionsGrowth likely to slow in Q4 as new US tariffs weighCPI seen rising to about 3.5% by year-endInflation to stay at or above 3% through much of 2027Indicators continue to point to some excess supplyUncertainty still elevated on Middle East, Canada-US tradeWe heard most of this after the Bank of Canada meeting. He isn't acknowledging some recent weakness in Canadian economic data but he might be pressed on that. The market is divided about the December meeting with a 56% chance of a hike priced in and about 75 bps priced in over the coming year.He kept the door open to further tightening in his opening statement, saying there “could be a need to raise the policy rate further” after last week’s 25 bp hike to 2.50%, the first increase since July 2023. He tempered that with a pledge to proceed carefully and take decisions one meeting at a time.The case rests on oil. Persistently high crude and refinery margins have kept CPI near 3% since April, and the BOC sees it climbing to about 3.5% by year-end and staying at or above 3% through much of 2027. Macklem flagged rising cost pass-through from businesses and a recovering economy as reasons the energy shock could become more persistent. Growth is expected to dip in Q4 on new US tariffs before rebounding to about 2% in 2027-28. He still noted some excess supply in the economy, which makes this a hawkish-but-cautious tone rather than a commitment to a hiking cycle. This article was written by Adam Button at investinglive.com.