Persistent high oil prices near $100 per barrel, sustained by the ongoing Middle East conflict and disruptions to energy supplies, have kept Canadian headline CPI at 3% as of August 2026, elevating upside risks to inflation and prompting markets to price in a higher likelihood of Bank of Canada tightening. With the policy rate held at 2.25% following the September 2 decision, overnight index swaps now imply a roughly 62% chance of a hike at the October 28 meeting and further increases by year-end, reflecting trader consensus that energy-driven price pressures could broaden despite core measures remaining near 2%. US tariff uncertainty adds downside risks to growth, but the Bank’s communications emphasize vigilance on inflation persistence over the coming quarters.