Canadian inflation data and the Bank of Canada’s Q3 Business Outlook Survey, both due on October 19, will be closely monitored for signs of broadening inflation pressures driven by high energy prices. These reports come ahead of the BoC’s interest rate decision on October 28, with policymakers concerned that elevated oil prices could spread beyond gasoline costs and influence broader inflation expectations.
The headline Consumer Price Index (CPI) is expected to remain at 3% year-over-year in September, marking the third consecutive month at this level. Energy inflation is likely to have accelerated due to rising gasoline and furnace oil prices, while food inflation is anticipated to moderate. Core inflation, excluding food and energy, is projected to ease to 1.8% in September from 2.1% in August.
The Business Outlook Survey will provide insights into how elevated energy prices are affecting firms’ inflation expectations and business sentiment. The survey period coincided with rising oil prices and escalating trade tensions, which are expected to have further dampened business outlooks. Key metrics to watch include changes in firms’ sales forecasts, investment and hiring plans, and inflation expectations.
While inflation risks are a concern, the Canadian economy shows signs of gradual improvement, albeit with softness in key areas. GDP growth is expected to slow in the second half of 2026, and the unemployment rate has plateaued around 6.5% after declining in the prior year. The BoC is likely to maintain a cautious stance on interest rates through the rest of 2026, balancing inflation and growth risks.