Elevated Interest Rates Continue to Weigh on Canadian Stocks
Canada's inflation rate remained at 3% in August, matching July's reading and tempering expectations that interest rates might soon decrease. The continued high energy prices are contributing to inflationary pressures.
The Bank of Canada may maintain its current policy stance given the latest data. However, policymakers could face pressure to raise rates if energy prices remain elevated and economic conditions continue to improve.
A prolonged period of higher interest rates weighs heavily on corporate profitability, especially for businesses relying on significant debt or ongoing capital investment. Telecommunications companies, real estate investment trusts (REITs), and utilities are among the sectors most affected by elevated rates.
BCE, a Canadian telecommunications company, faces pressure from high interest rates due to its significant debt to fund network infrastructure and other investments. In the second quarter of 2026, BCE's interest expense rose by $27 million compared to the same quarter in 2025. Year-to-date, interest costs were also $48 million higher.
RioCan REIT, which owns a diversified portfolio of properties in Canada's major urban centers, is also exposed to high-interest rates. Its interest expenses have increased so far in 2026, but its high-quality portfolio and strong occupancy levels continue to support growth.