(Bloomberg) — Markets see the Bank of Canada hiking interest rates more aggressively this year amid surging oil prices and hawkish messaging from peer central banks.

Traders in overnight interest rate swaps are betting Governor Tiff Macklem and his council raise borrowing costs by 75 basis points in 2026, starting with a quarter-percentage point hike in July, as of 2:30 p.m. Ottawa time on Friday.

It’s a major shift in pricing compared to Wednesday, when the central bank held its benchmark interest rate steady at 2.25%, and markets had seen just 25 basis points of tightening this year.

Policymakers said they were prepared to act if the surge in oil prices permeated into broader inflationary pressures, but Macklem pushed back on any expectation of near-term hikes, saying that the central bank would “look through” the immediate shock.

Officials also spent a considerable amount of time discussing the downside risks to growth and the weakened Canadian economy. Speaking after the decision, Macklem went as far as saying the bank “would be talking about lower rates” if growth continued to deteriorate — absent the upside risk of higher petroleum costs.

“The market is ignoring Macklem’s more patient and measured messaging,” said Benjamin Reitzes, rates and macro strategist at Bank of Montreal. “Focus is on the hawkishness of other central banks and fears of further escalation of the conflict in Iran.”

Brent crude was trading above $110 a barrel on Friday, up 56% since the end of last month. The Bank of England, the Federal Reserve and the European Central Bank also had decisions this week, with some offering more hawkish messaging on borrowing costs.

The selloff in global markets has gained momentum, and weaker demand for bonds has spread to Canada, with yields higher across the curve. Canada’s two-year bond was up 20 basis points on the day, trading at 3.039%.

“There’s absolutely no appetite from investors to buy the dip,” said Andrew Kelvin, head of Canadian and global rate strategy at TD Securities.

“If liquidity returns to the market, this potentially sets up for strong Canadian outperformance at the front end. The Bank of Canada does not sound even a little bit hawkish, and I wonder if they were at least in part trying to push back against market pricing,” he added.

Some analysts worry about the consequences of the central bank hiking amid a loosening labor market, ongoing trade damage from US tariffs and inflation below the central bank’s 2% target.

“With the economy so weak and underlying inflation subdued, tightening policy in response to temporarily high inflation risks becoming a serious policy error,” Royce Mendes, managing director and head of macro strategy at Desjardins Securities, wrote in a post on LinkedIn.

“Overreacting to a likely temporary inflation spike with more restrictive monetary policy could needlessly deepen the economic pain,” he added in a report to investors.

The market pricing for multiple hikes is also at odds with a recent Bloomberg survey of economists, who expect central bankers to hold borrowing costs steady throughout 2026.

The Bank of Canada next sets rates on April 29.

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