Elevated energy prices stemming from the Middle East conflict have kept Canada's headline CPI near 3.0% year-over-year through August 2026, with gasoline contributing the bulk of recent upside while core measures like CPI-trim and median remain anchored around 2%. The Bank of Canada held its policy rate at 2.25% in early September, citing contained spillovers but heightened upside risks to the inflation outlook. Traders' heaviest positioning in the 3.0-3.9% annual range for 2026 reflects this trajectory, tempered by BoC projections for easing to 2.5% in the second half and a return to the 2% target by early 2027, alongside upcoming data releases and the October policy decision that could shift sentiment if oil prices or tariffs evolve.