Elevated Canadian inflation at 3.1% in September 2026, combined with rising business and consumer expectations above 3.7% for 2027, has lifted the implied probability of a Bank of Canada rate hike in 2026 to 78.5%. Persistent energy prices from the Middle East conflict and U.S. tariff pressures are driving upside risks, prompting Governor Macklem to signal vigilance against spillovers into core measures. The policy rate remains at 2.25%, with soft labor data showing consecutive job losses and unemployment near 6.5%. Traders are pricing roughly 70% odds of a move at the October 28 decision, though most economist forecasts anticipate a hold through year-end before potential normalization in 2027. The next Monetary Policy Report will clarify the balance between inflation persistence and growth concerns.