Oct 20, 2026
Filling the tank cost Canadians almost 28% more in September than it did this time last year. That one expense was enough to push the national inflation rate higher again.
Annual inflation climbed to 3.1% last month, just above the top of the Bank of Canada’s 1% to 3% control range. The central bank’s next rate decision is Oct. 28 and, if you carry a variable-rate mortgage, have a renewal coming up or cash sitting in savings, the obvious question is whether borrowing costs are about to rise.
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The answer is less obvious than the headline number suggests. Strip out gas from the equation and price growth actually slowed.
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What pushed inflation to 3.1%?
The consumer price index (CPI) rose 3.1% year over year in September, up from 3.0% in August, according to Statistics Canada. Gasoline prices jumped 27.8% as crude oil hit its highest level since May amid the wars in the Middle East.
Home heating is an even bigger strain on some Canadian households. Prices for fuel oil and other fuels rose 57.8%, which hits hardest in Atlantic Canada, where more homes heat with oil.
The picture gets calmer when you remove energy costs. Excluding gasoline, inflation eased to 2.2% from 2.4% and grocery price growth slowed to 1.7%, the smallest annual increase since May 2024. That doesn’t mean food is cheap: grocery prices are still 33% higher than in September 2020.
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Why is the Bank of Canada talking about hikes?
The Bank of Canada (BoC), which sets the key interest rate that lenders use to price variable-rate loans, has held its policy rate at 2.25% since October 2025.
While rates haven’t moved, the tone of the bank’s decisions has. Days before the data landed, BoC Governor Tiff Macklem said the bank’s updated forecast will show inflation “quite a bit higher” than its July projection. Inflation had been projected to cool to about 2.5% in the second half of 2026.
The BoC’s concern is that pricey oil could spill into the cost of everything else, from shipping to airfare and everything in between. Its core inflation measures, which filter out volatile items like gas, tell a calmer story. CPI-median slowed to 1.9% and CPI-trim to 1.8% in September.
Is a hike likely on Oct. 28?
It’s hard to know for sure because it depends on what the BoC prioritizes in their decision. Headline inflation argues for a hike, yes. But at the same time, core inflation, along with recent job losses, argues for patience.
As of Oct. 17, investors didn’t appear to be betting on a rate hike at either of the BoC’s two remaining meetings this year. They do, however, expect rates to rise over the next 12 months, by about one percentage point in total. That’s the equivalent of four quarter-point hikes.
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So even if the bank holds rates next week, markets expect its next move could be a hike.
What would a rate hike mean for your money?
Variable-rate mortgages, home equity lines of credit (HELOCs) and other debt that is linked to prime rate would feel a hike almost immediately.
In this hypothetical example, a homeowner carries a $500,000 variable-rate mortgage at 4.45% on a 25-year amortization. A quarter-point hike to 4.70% would raise the monthly payment by roughly $70 and two hikes would double that.
Fixed mortgage rates follow bond yields rather than the bank’s rate directly, but expectations of future hikes can push them higher before the bank moves.
For savers, the outlook is more positive. Rates on high-interest savings accounts and GICs tend to rise when the central bank tightens.
What to do now
- Stress-test your budget at a mortgage rate 0.5% higher than today
- If you have to renew within the next four months, ask your lender about a rate hold
- Pay down variable-rate debt, such as lines of credit, before rates climb
- If you heat your home with oil, budget now for higher winter bills
- Consider shorter GIC terms or a GIC ladder, so you can reinvest if rates rise
- Use StatCan’s Personal Inflation Calculator to see how your own spending compares with the 3.1% average
As the Oct. 28 decision nears, the biggest signal to keep an eye out for is the bank’s new forecast. If it shows inflation staying above target well into 2027, borrowers should plan for higher costs whether or not rates move next week or next year. As Macklem put it, the bank is “prepared to adjust monetary policy as needed.”
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Leslie Kennedy served as an editor at Thomson Reuters and for Star Media Group, followed by a number of years as a writer and editor and content manager in marketing communications, before returning to her editorial roots. She is a graduate of Humber College’s post-graduate journalism program and has been a professional writer and editor ever since.
