Economists are revising their forecasts upward for Canadian inflation, with recent surveys indicating that price pressures will take longer to subside than previously anticipated. According to a Bloomberg survey, analysts now project that inflation will not return sustainably to the Bank of Canada’s two per cent target until the third quarter of next year.
The consumer price index (CPI) is expected to average three per cent over the coming six months, marking a notable increase of 0.6 percentage points compared to previous forecasts. This shift toward a “higher-for-longer” inflation environment coincides with renewed volatility in global energy markets and shifting economic dynamics.
Drivers of Persistent Price Pressures
A primary catalyst behind the upward revision in inflation forecasts is the recent resurgence in oil prices, driven largely by geopolitical tensions and conflict in the Middle East. Bank of Canada Governor Tiff Macklem has repeatedly cautioned that persistently elevated gasoline and energy prices risk keeping headline inflation above target. Furthermore, these costs threaten to broaden price pressures across other sectors of the domestic economy.
Despite the hotter near-term outlook for inflation, economists maintain a measured view regarding monetary policy adjustments. Current consensus suggests that the Bank of Canada will hold off on raising its benchmark interest rate, currently sitting at 2.25 per cent until its June meeting. This perspective diverges somewhat from market pricing, where overnight swap traders view the probability of a rate hike as an even split.
Moderating Economic Growth and Recession Risks
The prolonged persistence of inflation is also weighing on broader economic momentum. Forecasters have downgraded their expectations for Canada’s economic growth, with annualized real GDP growth now projected at a modest 1.5 per cent for both the fourth quarter and the first quarter of next year. This represents a downward adjustment from previous estimates of 1.7 per cent for each period.
In addition to softer growth projections, economists currently estimate the probability of a recession in Canada at approximately 30 per cent. These figures underline the delicate balancing act facing Canadian policymakers as they navigate sticky inflation alongside a cooling economic landscape.
Implications for Businesses and Policymakers
For Canadian businesses and investors, the latest survey data signals a need for continued caution. A prolonged timeline for reaching the two per cent inflation target implies that borrowing conditions and operational costs will remain under pressure for an extended period.
As Statistics Canada prepares to release its upcoming consumer price reports, corporate planners and financial institutions will be closely monitoring whether energy-driven price hikes begin to seep deeper into core domestic goods and services. Navigating this environment will require financial resilience and strategic agility as Canada adjusts to a more complex global economic reality.
This article is based on reporting by the Financial Post and has been adapted for CCCH News.
Source: Financial Post
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Written for the Canadian Chamber of Commerce in Hungary News Section as part of our ongoing coverage of developments affecting Canadian trade, economy and international partnerships, September 2026