Canada’s inflation rate climbed to 3.1% in September 2026, up from 3.0% in August, putting fresh pressure on the Bank of Canada ahead of its October 28 interest rate decision.
Yet markets aren’t convinced a rate hike is coming. Despite inflation moving above the central bank’s target range, Bank of Canada Odds shows a 78% probability of holding rates steady at 2.25%.
Statistics Canada’s October 19 report revealed the divide behind those expectations. Energy prices surged, grocery inflation cooled, and underlying price pressures remained relatively contained. The headline reading also came in below economists’ 3.2% forecast.
Energy Prices Surge While Grocery Inflation Cools
Gasoline prices jumped 27.8% year over year, compared with 22.8% in August. Overall energy inflation accelerated to 19.0% from 15.4%, driving much of September’s increase.
However, inflation excluding gasoline slowed to 2.2% from 2.4%, suggesting that energy prices accounted for much of the rise in headline CPI.
Meanwhile, grocery inflation eased to 1.7% from 2.8%, its slowest annual pace since May 2024.
Other household expenses showed mixed trends. Rent inflation held at 2.8%, restaurant prices rose 3.1%, and auto insurance inflation eased to 5.0%. Mortgage interest costs declined 0.2%.
September 2026 CPI Highlights
Source: Statistics Canada, Consumer Price Index, September 2026.
Hike or Hold? What the Latest BoC Odds Reveal
Despite September’s higher inflation reading, markets continue to favour an unchanged policy rate at the Bank of Canada’s October 28 decision.
As of October 19, Bank of Canada Odds’ CORRA futures-based estimates assigned:
- 78% probability of holding at 2.25%.
- 22% probability of hiking to 2.50%.
Source: BankofCanadaOdds.com, CORRA futures-based market-implied probabilities as of October 19, 2026. Probabilities may change before the decision.
The case for a hike: Inflation has moved above the Bank of Canada’s 3% upper target boundary, while rising energy costs raise concerns about persistent price pressures.
The case for a hold: CPI-median at 1.9% and CPI-trim at 1.8% suggest underlying inflation remains relatively contained. Combined with recent labour market weakness, these figures support a more cautious approach.
Inflation is heating up, but markets aren’t rushing to price in a rate hike. With energy prices climbing and core inflation cooling, the Bank of Canada faces a tough call ahead of October 28.
With CPI at 3.1% and hold odds at 78%, do you agree with the market, or would you favour a rate hike?
Follow the latest market-implied rate probabilities at Bank of Canada Odds.
Sources: Statistics Canada — September 2026 Consumer Price Index and Bank of Canada — Policy Interest Rate.
