Macquarie Group is adjusting its interest rate projections in light of Canada’s recent inflation data.

On Tuesday, Statistics Canada revealed Canada’s inflation had jumped to four per cent, up from 3.3 per cent in July, as the agency blamed gas prices for the jump.

In a report Tuesday, the financial firm changed its short-term outlook and now expects the Bank of Canada to raise interest rates by 25 basis points on Oct. 25, which would bring interest rates to 5.25 per cent.

“We thought about keeping our previous call, which was for them to hold with a hawkish bias, but as we run through that data and unpacked a lot of the details in the CPI [Consumer Price Index] for August we just came away with the conclusion that there was a lot of evidence that the underlying numbers confirmed and that it was likely to push the BoC [Bank of Canada] towards another hike,” David Doyle, head of economics at the Macquarie Group, told BNN Bloomberg in a television interview Thursday.

An October rate hike is now what economists at BKForex and RSM Canada are also predicting.  

Macquarie does note that incoming data could change things, notably September’s CPI, the bank’s Business Outlook Survey for the third quarter and the September Labour Force Survey.

“It’s possible some of the incoming information over the next month or so could tilt the balance for us the other way, but we just think a lot of that data has to go right in order for the BoC not to hike,” Doyle said.

The Bank of Canada begun raising interest rates in March 2022 as in an effort to bring inflation back down to its two per cent goal.