Canadian Businesses Cope with Interest Rate Changes, Inflation

Since 2021, Canadian businesses have been facing various challenges, including interest rate changes and inflation. The Bank of Canada's policy interest rate peaked at 5% from July 2023 to June 2024, affecting nearly two-fifths of businesses that expected interest rates and debt costs as an obstacle for their short-term operations.

However, with the easing of interest rates to 2.25% in early 2026, the proportion of businesses citing interest rates and debt costs decreased. Nevertheless, by the third quarter of 2026, nearly one-quarter of businesses still reported this as an expected obstacle.

Inflation also had a significant impact on business expectations, with 60% of businesses anticipating it as an obstacle in the third quarter of 2022. Although this proportion dropped to less than half by the end of 2024 and throughout 2025, 41.6% of businesses still expected inflation as an obstacle in the third quarter of 2026.

The cost of inputs, including labor, raw materials, and energy costs, was also a concern for businesses. The proportion of businesses reporting input costs fell by more than half to 24.1% by the end of 2026.