September Inflation Data Expected to Show Modest Rise
Statistics Canada is scheduled to release its September inflation figures on Monday, giving the Bank of Canada fresh insight into how energy price pressures are affecting the broader consumer basket.
A Reuters poll of economists, compiled by LSEG Data & Analytics, forecasts that the annual inflation rate rose to 3.2 percent in September, up from 3.0 percent in August.
Energy Prices Remain the Primary Driver
RBC assistant chief economist Nathan Janzen noted that he expects inflation to have held steady at around 3 percent in August, but stressed that persistently high gasoline prices—linked to the ongoing war in Iran—continue to be the biggest fuel for inflation.
Janzen added that while it is clear energy prices are elevated, the extent to which those higher costs will spill over into other parts of the economy remains uncertain.
Bank of Canada’s Stance on Temporary Energy Shocks
The Bank of Canada signalled at the outset of the Middle East conflict last spring that it would look through a temporary rise in energy costs tied to the war. However, officials have warned that the longer global oil prices stay elevated, the greater the risk that inflation spreads beyond the gas pump.
If that occurs, the central bank could be compelled to raise its policy rate, which has hovered near 2.25 percent for almost a year—a level most economists view as modestly stimulative for growth.
Upcoming Rate Decision and Economic Cross‑currents
Looking ahead, Janzen described the Bank of Canada’s October 28 meeting as a “live” session where the door remains open for a policy‑rate increase, although he does not consider a hike his base‑case scenario.
Even if the September data reveal inflationary pressures leaking past the gasoline market, Janzen said the central bank will balance those signals against signs of softness in the labour market and the wider economy.
Labour Market Weakness Offsets Inflation Pressure
Statistics Canada reported last week that the economy shed 68,000 jobs in September, marking a second straight month of employment declines. A re‑escalating trade dispute with the United States has also clouded growth prospects heading into the fourth quarter.
Janzen observed that higher energy prices, all else equal, would be expected to generate broader inflation pressures over time. Yet a weakening economy introduces offsetting disinflationary forces that could temper those effects.
He concluded that the Bank of Canada remains in a wait‑and‑see mode, emphasizing a highly data‑dependent approach.
Business and Consumer Surveys to Inform Policy
On the same day as the inflation release, the Bank of Canada will publish its quarterly surveys of businesses and consumers. Those results will help the central bank gauge whether firms intend to pass on their rising costs to consumers.
Janzen said that inflation expectations and business confidence will be key inputs in assessing whether higher producer prices will eventually appear on store shelves in the months ahead.
