Possible Bank of Canada Hike Back in Focus as Higher Energy Prices Raise Inflation Risks, Commerzbank Says

09:47 AM EDT, 10/20/2026 (MT Newswires) -- A Bank of Canada rate hike next week is back in focus as elevated energy prices add to inflation risks, according to Commerzbank Research in a Tuesday note. Financial markets raised the odds of a rate increase at the Oct. 28 policy meeting from 36% to above 75% on Monday, after BoC Governor Tiff Macklem over the weekend indicated that higher oil prices are boosting the Canadian economy more than previously expected, Commerzbank wrote in the note. September headline inflation rose to 3.1% annually on Monday, below the 3.2% consensus but above the BoC's earlier forecast, while core inflation remained contained at around 2.1%, suggesting price pressures are still largely energy driven, said the bank. The BoC's Monday business survey highlights ongoing inflation risks, with firms expecting input and selling prices to rise over the coming year. However, most responses predate renewed US trade tensions, limiting their relevance to the current outlook, Commerzbank added. As a consequence, Canada's central bank faces a trade-off between addressing rising inflation risks early and waiting for evidence of more widespread price pressures, the bank said. While subdued core inflation and economic weakness make an October hike uncertain, persistent energy costs could increase the need for tightening, with expectations of higher rates providing further support to the Canadian dollar.