Written by Aditya Raghunath at The Motley Fool Canada
Bank of Canada Governor Tiff Macklem has a message for anyone hoping the inflation fight is behind them.
Speaking this month after the central bank held its benchmark interest rate at 2.25% on September 2, Macklem pointed to a combustible mix of high oil prices and renewed U.S. tariffs. Together, he warned, they could keep price pressures elevated well into next year.
Canada’s headline inflation rate has been hovering near 3% in recent months. Gasoline prices are the main culprit, even as core inflation stays closer to the Bank of Canada’s 2% target.
For everyday Canadians, that means grocery bills, fuel costs, and monthly budgets are likely to feel tight for a while longer.
Why Macklem is sounding the alarm on prices
Macklem flagged that if crude oil stays near US$100 a barrel, the Bank of Canada would expect inflation to edge higher in the months ahead.
He also cautioned that new U.S. tariffs could work their way into consumer prices over time. Add Middle East tensions pushing energy costs higher, and Canada’s fourth-quarter growth could be cut to below 1%.
Basically, the Bank of Canada is prepared to hold rates higher for longer rather than risk letting inflation expectations spiral. The next rate decision isn’t due until October 28, so investors have a few weeks to position themselves.
That backdrop points to a clear playbook. Look for businesses that benefit from higher energy prices, hold enough pricing power to pass along rising costs, or act as a traditional hedge when inflation runs hot. Here are three top TSX stocks worth watching.
Is RBC stock a good buy?
In the third quarter, Royal Bank of Canada (TSX: RY) posted a return on equity of just over 18%, up from 15.5% back in 2024. CFO Katherine Gibson credited a combination of revenue growth and disciplined cost management for the improvement in RoE.
She also offered a candid view on how rising rates would flow through the business, noting that a 25-basis-point increase on the short end of the curve translates into roughly $35 million in annual net interest income.
This kind of direct, quantifiable sensitivity is what investors expect from an experienced bank management team during an uncertain rate cycle.
RBC’s diversification across personal banking, commercial lending, wealth management, and capital markets gives it several ways to keep growing even if one segment slows.
The bull case for CNQ stock
Canadian Natural Resources (TSX: CNQ) is positioned to benefit directly from higher oil prices. The company posted record second-quarter results in 2026, including total corporate production of about 1.677 million barrels of oil equivalent per day and adjusted funds flow of $6.9 billion.
CNQ returned roughly $4 billion to shareholders in the quarter alone, split between dividends, buybacks, and debt reduction. With 26 consecutive years of dividend increases, CNQ offers a rare combination of growth and reliability among Canadian energy names.
Is the TSX mining stock a good buy?
Gold has always been the go-to hedge when inflation worries resurface, and Agnico Eagle (TSX: AEM) is one of the strongest operators in the business. The company expects to generate about $4 billion in free cash flow this year while still funding a record $600 million exploration budget.
CFO Jamie Porter made a compelling case for why gold prices may stay firm, pointing to a decades-long lack of exploration success across the industry:
“I do think we’re at or near peak gold production.”
Combined with a 43-year dividend streak and a net cash position approaching $4 billion, Agnico offers investors a rare mix of growth, financial strength, and inflation protection.
The Foolish takeaway
Macklem’s message is clear. Elevated inflation isn’t going away anytime soon. So, investors should build a diversified portfolio of quality stocks that can withstand an uncertain macro environment.
A blue-chip bank benefiting from higher rates, an energy producer cashing in on strong oil prices, and a gold miner offering a classic hedge give Canadian investors three distinct ways to navigate a stickier-than-expected inflation picture.
The post Tiff Macklem Warns Inflation Will Stay Elevated: 3 Stocks to Watch appeared first on The Motley Fool Canada.
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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.
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