Statistics Canada is set to release its October consumer price index on Monday, following a 3.1% annual inflation rate in September amid concerns about energy-driven price pressure.
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Canada’s inflation rate is expected to stay elevated as new figures are released next week, but economists disagree on whether rising energy costs will push price increases beyond gasoline.
Statistics Canada will publish its October consumer price index report on Monday, a monthly measure of changes in the cost of goods and services typically purchased by Canadian households.
The annual inflation rate rose to 3.1 per cent in September, as war in the Middle East continued to drive up gasoline prices.
The question for economists is whether higher energy costs will lead to broader inflation across the economy, prolonging elevated readings and influencing interest-rate decisions.
LJ Valencia, an economist with Desjardins Economics, said persistently high energy costs could drive up prices more broadly, adding that he expects October inflation to be “similar or perhaps slightly higher” than September.
Valencia said businesses have largely shielded consumers from higher energy costs so far, but their ability to absorb the increases is limited, noting that “At some point, they’re going to start passing on these higher costs to consumers.”
CIBC Capital Markets takes a different view, arguing in a client note that manufacturers, wholesalers and retailers face sharply higher input costs but that passing those costs on could lead to “sticker shock” that hurts demand.
CIBC economists Avery Shenfeld and Helen Lao 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.”
They added that, if so, inflation would “not escalate nearly as much as (the Bank of Canada) expects,” reducing urgency for further rate hikes.
The Bank of Canada expects inflation to remain above three per cent through much of 2027, and it targets two per cent inflation, the midpoint of its one-to-three per cent range.
The central bank raised its key interest rate by a quarter of a percentage point to 2.5 per cent on Oct. 28, its first increase in more than three years, citing concerns that higher energy costs could fuel broader inflation.
RBC economist Salim Zanzana said in a research note that energy-driven inflation affects regions differently across Canada.
Zanzana said higher energy costs hit Atlantic Canada particularly hard because home heating oil is more widely used there, while inflation remains lower in provinces including Ontario and British Columbia.
He said higher rates may help contain inflation in areas where price pressures have persisted, but they could also compound economic challenges in places where inflation is less problematic, including Ontario and B.C.
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