Canadian Households Still Reeling from Price Pressures

A recent report by RBC Economics warns that Canadian households are still facing significant price pressures, despite some easing of the cost-of-living challenge. Essential costs such as food and shelter have risen at an average annual rate of 5% over the past six years, nearly double the pace of the prior six-year period.

The Middle East conflict has added to these pressures through higher gasoline prices in 2026, although Canadian households 'haven't really pulled back on non-gas spending', according to RBC Economics' Claire Fan. The federal government's temporary elimination of gas taxes - 10 cents per liter - provided some relief, but pump prices have not fallen as sharply as global crude would suggest due to structural factors such as refinery margins and exchange rates.

The Bank of Canada is caught in a dilemma, supporting growth while keeping inflation low and steady. 'Sticky inflation' combined with consumers feeling increasingly stretched presents a significant challenge for the central bank. With the overnight rate expected to hold at 2.25% through year-end, rate hikes are projected for 2027 contingent on base case economic projections materializing.