Inflation expected to stay high as economists weigh risk of broadening price hikes

Summary

• Canada's annual inflation rate rose to 3.1 per cent in September as Middle East conflicts drove up gasoline prices.
• Statistics Canada is set to release the October consumer price index report on Monday.
• Economists are divided on whether rising energy costs will trigger broader price increases & further interest rate hikes.
• Desjardins economist LJ Valencia expects October inflation to be similar to or slightly higher than September, noting businesses may soon pass energy costs to consumers.
• CIBC Capital Markets economists argue that weak consumer demand & healthy profit margins may prevent businesses from raising prices, potentially reducing the urgency for rate hikes.
• The Bank of Canada forecasts inflation will remain above 3 per cent through much of 2027 while aiming for a 2 per cent target.
• The central bank raised its key interest rate to 2.5 per cent on Oct. 28, marking its first increase in over three years.
• RBC economist Salim Zanzana highlighted regional disparities, noting Atlantic Canada is hit harder by heating oil costs while Ontario & British Columbia face lower inflation due to weaker economic conditions.