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OTTAWA — Canada’s inflation rate is expected to remain elevated when new figures are released next week, but economists are divided over whether rising energy costs will fuel broader price increases.
Statistics Canada will release its October consumer price index report Monday.
The monthly report tracks changes in the cost of goods and services typically purchased by Canadian households, offering a snapshot of how prices are affecting consumers’ purchasing power.
As of Friday morning, a Reuters poll of economists predicted the annual rate of inflation rose to 3.2 per cent in October, up from 3.1 per cent in September, according to LSEG Data & Analytics.
The big question among economists now isn’t just how high inflation has climbed but whether rising energy costs will push up prices across the economy, keeping inflation elevated for longer and potentially prompting further interest rate hikes.
LJ Valencia, an economist with Desjardins Economics, said persistently high energy costs risk driving up prices more broadly.
He said he expects October inflation to be “similar or perhaps slightly higher” than September.
Valencia said businesses have largely shielded consumers from rising energy costs so far, but their ability to continue absorbing those increases is limited.
“At some point, they’re going to start passing on these higher costs to consumers,” he said.
Yet CIBC Capital Markets said higher business costs won’t necessarily translate into higher consumer prices.
In a client note, economists Avery Shenfeld and Helen Lao said manufacturers, wholesalers and retailers are indeed facing sharply higher input costs.
But they argued that passing those costs on to consumers could cause enough “sticker shock” to hurt demand, forcing businesses to cut prices again to maintain sales.
They said weak consumer demand and relatively healthy profit margins among wholesalers and retailers mean “those margins, rather than consumers, will bear a significant share of the burden of higher costs.”
“If so, the implication is that inflation will not escalate nearly as much as (the Bank of Canada) expects, leaving less urgency for further rate hikes ahead,” the CIBC economists said.
The Bank of Canada expects inflation to remain above three per cent through much of 2027.
The central bank aims to keep inflation at two per cent, the midpoint of its target range of one to three per cent.
It can raise interest rates to curb borrowing and spending when inflation is too high or lower rates to encourage economic activity when inflation is weak.
On Oct. 28, the bank raised its key interest rate by a quarter of a percentage point to 2.5 per cent, its first increase in more than three years, amid concerns that higher energy costs could fuel broader inflation.
With the Bank of Canada signalling further rate hikes may be needed, inflation figures are being closely watched for clues about its next move.
Its decisions affect everything from mortgage payments and consumer spending to business investments.
Meanwhile, RBC economist Salim Zanzana said in a research note that while energy prices are driving inflation, the impact varies widely across the country.
He said higher energy costs are hitting Atlantic Canada particularly hard because home heating oil is more widely used in the region, while inflation remains lower in provinces like Ontario and British Columbia where economic conditions are weaker.
“While higher rates may help contain inflation in regions where price pressures have been more persistent, they could also compound economic challenges elsewhere where inflation is less problematic, for example in Ontario and B.C.,” Zanzana said.
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Brett Bundale, The Canadian Press
This report by The Canadian Press was first published Nov. 13, 2026.
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