MediumIV Macro Policy & Sovereign Debt19 October 2026, Monday
Canadian inflation rises to 3.1% while core gauges stay below target
Annual inflation in Canada rose from 3.0% to 3.1% in September, with petrol up 27.8%. The central bank's core measures eased to 1.8-1.9%; after Macklem's weekend signal on rates, the data weakened expectations of a 28 October increase.
Statistics Canada put September inflation at 3.1% on 19 October, against 3.0% in August. Petrol prices rose 27.8% year on year and heating oil and other fuels 57.8%. Inflation excluding petrol eased from 2.4% to 2.2%. Annual grocery store food inflation fell to 1.7%, the lowest since May 2024. According to BNN Bloomberg, economists had expected a headline rate of 3.2%.
The core gauges the central bank watches also slowed. CPI-trim, which strips out the tails of price changes to measure the persistent component, fell from 1.9% to 1.8%, and CPI-median from 2.0% to 1.9%. Governor Tiff Macklem said over the weekend that high oil carried a broader inflation risk, and the market had raised the odds of an increase at the 28 October meeting. BMO chief economist Douglas Porter argues that core holding near 2% shows the price rise has not spread beyond petrol.
In Newsquawk's 19 October round-up, Macklem noted that high oil also supports growth and investment in Canada. Brent December futures traded in a 107.70-109.65 dollar band the same morning. In an oil-exporting economy the same shock opens both a price channel and an income channel, which is why the 1.2 point gap between headline and core in Canada poses a different policy question from the one in the United States and Europe.
Talay assessment
Bottom line
The September data show the oil shock has not yet spread across a broad base in Canada, with headline at 3.1% and core measures at 1.8-1.9%. The door Macklem opened to a rate rise at the weekend is still there, but holding on 28 October looks likelier. Because Canada also earns income from the same shock as an oil exporter, it can tie its decision to its own core data rather than to the United States.
Likely effects
- Monetary policyUncertainWeeks
Core measures slipping below 2% weaken expectations of an increase on 28 October, and economists at BMO and CIBC see no reason to hurry.
- Household budgetsNegative1–6 months
Annual rises of 27.8% in petrol and 57.8% in heating fuel swell the energy bill before winter, even with food inflation down at 1.7%.
- Rate differentialNegative1–6 months
If the Fed raises in December while Canada waits, the gap between the two widens, which could press the Canadian dollar and lift imported inflation.
Possibilities, ranked
- 1A hold on 28 October60%
The bank keeps the rate unchanged and leaves the door open to an increase against the risk of oil seeping into core.
Watch: Emphasis on second-round effects in the text of the 28 October rate decision
- 2An October increase25%
Macklem's warning prevails and a 25 basis point rise arrives on the grounds that oil is persistent.
Watch: The path of the Canadian two-year yield ahead of the decision
- 3The increase slips to December15%
If the October and November data show a jump in core, the rise is deferred to the December meeting.
Watch: CPI-trim and CPI-median in the October inflation report
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Canada CPI (annual)▼ 3.1%
- CPI-median▲ 1.9%
- Petrol (annual)▼ +27.8%