Roughly Half of Surveyed Canadian Firms Plan to Raise Prices

When the Bank of Canada held its policy rate at 2.25 per cent on September 2, it named the development that would make it move. Its Governing Council said it would watch whether costlier gasoline and diesel start to raise the price of everything else. By the afternoon of October 19, the Bank had two answers to its own question, and they point in different directions.

The first came from Statistics Canada, which reported that prices outside energy cooled in September. The second came from the Bank's own quarterly surveys of firms and households, announced the same day, which showed more businesses planning to raise prices and more households expecting inflation to last. Both matter to anyone in Canada with a variable-rate mortgage, a renewal coming up or money in a savings account, because the Bank sets its rate on October 28 with both in front of it.

The question the Bank set itself in September

A central bank cannot do much about the price of oil. A war in the Middle East, a refinery outage or a shipping lane closed by conflict all raise the price at the pump, and a higher interest rate in Ottawa does not reopen the Strait of Hormuz. What a central bank can influence is whether that first increase turns into a second and a third, as businesses pass on their fuel bills, workers ask for raises to keep up, and everyone starts to assume prices will keep climbing.

Economists call those later increases second-round effects. They are the part of an energy shock a central bank treats as its own business.

The Bank's statement of September 2 stated that "upside risks to the Bank's inflation forecast have increased" and that the Bank "is prepared to adjust monetary policy as needed." The summary of the Governing Council's deliberations, published two weeks later, was more specific. Members found "little evidence thus far that high gasoline prices were passing through to other goods and services," and they agreed that if energy prices did spill over, "it could require a monetary policy response to prevent broad-based inflation from setting in."

Maple's October 17 piece, The Bank of Canada Weighs Costlier Gasoline Against Lost Jobs, set out the other side of the Bank's ledger, as the Labour Force Survey showed it: 68,000 jobs lost in September and an unemployment rate of 6.5 per cent. It ended with the September price index still to come. That index is now published.

Gasoline did the lifting in September

Statistics Canada reported that its consumer price index rose 3.1 per cent in the year to September, up from 3.0 per cent in August. Nearly all of that came from the pump.

Gasoline prices were 27.8 per cent higher than a year earlier and rose 6.1 per cent in September alone, the agency said. Heating fuel climbed faster still: fuel oil and other fuels were up 57.8 per cent from a year earlier.

For a household, the arithmetic is simple and unwelcome. The October 17 piece used a family that spent C$163 a month on gasoline a year ago and would have spent about C$200 for the same litres in August. After September's 6.1 per cent rise in the gasoline index, the same tank-filling costs about C$212 a month.

Take energy out and the picture changes. Prices excluding energy rose 2.1 per cent over the year, according to Statistics Canada, and slipped slightly in the month; the narrower measure that also leaves out food, shown in the table, rose 2.1 per cent as well.

Grocery prices rose 1.7 per cent from a year earlier, the smallest increase since May 2024. Rent rose at the same pace as in August, and the mortgage interest cost index was a little lower than a year before.

Sources: Statistics Canada, Consumer Price Index, September 2026 (The Daily, October 19, 2026) and August 2026 (September 14, 2026); Bank of Canada, consumer price index and core measures table.

CPI-trim and CPI-median are the two measures the Bank leans on most. Each strips out the biggest price swings in a given month, up and down, to show the pace of the typical price. In September both sat below the Bank's 2 per cent target, and both eased from August.

On the evidence of prices alone, the spillover the Bank was watching for had not arrived by September.

Why a survey of about 100 firms sits beside the price index

A price index tells you what has already happened. A central bank has to set policy for the year or two ahead, because a rate change takes roughly that long to work through mortgages, business loans and spending. So it also asks people what they expect.

Expectations matter because they are partly self-fulfilling. A business that expects its costs to rise 4 per cent next year prices its products with that in mind. A worker who expects 4 per cent inflation asks for a raise to match it. If enough people make those decisions, a temporary jump at the pump becomes a lasting rise in the general price level.

According to the Bank's description of its method, the Business Outlook Survey interviews about 100 firms across the country each quarter. The third-quarter round ran from August 6 to September 2, so it straddles August 21, the day Canada-US trade negotiations broke down and new US tariffs and Canadian counter-tariffs followed.

Roughly half of surveyed firms plan to raise their prices

The survey's clearest finding on prices is this one. "Roughly half of firms, more than in the previous quarter, said they plan to pass on to customers" some or all of their higher costs related to the war in the Middle East and tariffs, the Bank reported.

According to the survey, firms' one-year inflation expectations dipped in July and August, then "rose again in September following the breakdown in trade talks," the Bank reported. Their expectations for inflation over the next two years eased from the second quarter but "remain elevated." Almost one-quarter of firms, more than in the previous quarter, told the Bank it was too hard to say when inflation would return to 2 per cent.

Other parts of the survey pull the other way. The share of firms planning or budgeting for a recession over the next 12 months fell from 17 per cent to 6 per cent, the lowest since the Bank began asking in 2023. Hiring intentions "remain soft and below their historical average," which matters because wage pressure is the usual route by which a price shock becomes persistent. Wage growth expectations were roughly unchanged and near their historical average.

Firms are more willing to raise prices and less worried about a recession, and they are not planning to hire or pay much more.

Households expect more inflation for longer

The Bank's Canadian Survey of Consumer Expectations ran over the same weeks, online from August 5 to 27, with follow-up telephone interviews to September 4. Near-term expectations, the Bank reported, "remain above both their historical average and levels seen before trade tensions began," and "long-term inflation expectations moved higher this quarter."

The long-term number is the one central bankers watch most closely. Short-term expectations move with the price of gasoline. Long-term expectations move when people start to doubt that the Bank will bring inflation back to 2 per cent at all.

Consumers "continued to cite tariffs and trade tensions as the top factor affecting inflation," and most expect the war in the Middle East to raise inflation over the next 12 months. Respondents who answered after August 21 expected slightly higher inflation at every horizon. About half still expect a recession, and spending intentions edged down and remain below the survey average.

The Bank publishes the precise survey values in its downloadable data rather than in the text of either release, so the direction is clear from the Bank's own words while the size of each move sits in those files.

What 2.25 per cent is worth against each number

One way to see the Bank's position is to subtract inflation from the policy rate. The result, the real policy rate, tells you whether the Bank is pressing on the economy's brakes or its accelerator.

Desk calculation from the Bank of Canada's 2.25 per cent policy rate (held September 2, 2026) and the September 2026 measures above.

Against headline inflation, money is cheap: the policy rate is below the rate at which prices are rising. Against the Bank's core measures, policy is slightly restrictive. The gap between those two lines is the whole debate, and the surveys are the Bank's best guide to which line the next year will look like.

Savers feel the same arithmetic in reverse. A C$10,000 balance earning 2.25 per cent pays about C$225 over a year.

If prices rise at September's headline pace, the goods that C$10,000 bought a year earlier cost about C$310 extra, and the saver loses ground. At the core pace of about 1.9 per cent, the saver comes out roughly C$35 ahead.

Borrowers feel the rate itself. On a C$400,000 variable-rate mortgage, a change of a quarter of a percentage point in the rate a lender charges moves the annual interest bill by about C$1,000. Households renewing a fixed-rate mortgage in the months ahead face bond yields, which move on what markets expect the Bank to do rather than on what it has done.

Wednesday comes with a full forecast

The Bank announces its decision at 9:45 a.m. Eastern on Wednesday, October 28, together with its October Monetary Policy Report, the quarterly document in which it publishes a full forecast for growth and inflation. A report quarter gives the Bank room to explain how it weighs a cooler September index against firms and households who expect hotter prices.

The September deliberations stated that new US tariffs had been imposed on roughly 5 per cent of Canadian goods exports to the United States, and the Bank reported that firms surveyed after August 21 were more likely to say trade tensions had raised their costs and prices, and had lower export expectations. The next consumer price index, for October, is scheduled for Monday, November 16, and the Bank's final decision of the year follows on December 9.

The Bank asked in September whether fuel would spread into other prices. September's prices say it has not yet, and the firms setting them say they intend to raise them. The Bank gives its answer, with a new forecast beside it, at 9:45 a.m. Eastern on Wednesday.