Some of the ballots for the referendum are still being counted, but the unofficial results from Elections Alberta show that about 75% of voters said Alberta should remain a province of Canada. This is in keeping with the status quo assumption we made in our most recent economic forecast. What has changed is the uncertainty surrounding the outcome. Many Alberta businesses were reporting that the uncertainty was having a negative impact, and today’s results will provide more clarity.

In today’s Twenty-Four, we examine the inflation expectations in the recently-released Canadian Business Outlook Survey and Canadian Survey of Consumer Expectations from the Bank of Canada.

Key points

• Businesses surveyed after Canada-U.S. trade negotiations broke down expect inflation to be 3.7% a year from now.
• Canadian consumers expect inflation to be well above the 2% target over the next 12-24 months.
• The Bank of Canada has many factors to consider, but elevated inflation expectations add to the case for rate hikes.

From the perspective of a central bank trying to keep inflation near its 2% target, rising inflation expectations can be a problem as they can lead to behaviours that turn the expectations into reality. This is why central banks want inflation expectations to be “anchored” (i.e., for consumers, businesses, and investors to believe that long-term inflation will stay low and stable). It is notable, therefore, that two recent surveys conducted by the Bank of Canada show that inflation expectations have been edging up.

Let’s start with how businesses are thinking about inflation. The Bank of Canada conducted its Business Outlook Survey from August 6 to September 2, 2026. The timing is important because the inflation expectations of the firms surveyed after trade talks between Canada and the U.S. broke down on August 21 are higher than those surveyed before the breakdown (see the chart below). This finding strengthens the case for eventual policy interest rate increases aimed at bringing inflation expectations, and inflation itself, closer to the 2% target.

If there is good news, it’s that longer-term inflation expectations have held fairly steady. Businesses say that the five-year outlook for inflation is 2.7%—roughly on par with previous months, including prior to the war in Iran.

Turning to the inflation expectations of Canadian consumers, the recent survey results show that they are also running high. Inflation expectations over the next 12 months and 24 months didn’t change much from the previous quarterly survey, but are almost double the 2% target. At the same time, long‑term inflation expectations moved higher in the third quarter to match the elevated short‑term expectations.

As with the businesses that expect inflation to be higher than the 2% target, the fact that consumers see inflation growing by around 4% adds to the case for tighter monetary policy aimed at heading off behaviours that would see these expectations turn into reality.

At the same time, although the Bank’s preferred measures of core inflation (median and trim) are near target, they are starting to show signs of trending upward and an end to the conflict in the Middle East that is keeping energy costs elevated is not currently in sight. Both of these factors suggest inflation may be higher for longer and require more restrictive monetary policy in response.

The Bank of Canada, however, will also be looking at other factors such as evidence of a soft economy (e.g., job losses in the last two months and a weaker third quarter for economic growth) and the impact of already elevated longer-term borrowing rates when making its rate decisions on October 28 and December 9. As discussed yesterday, we are leaning toward a “hawkish” hold next week on the basis that a soft economy and core inflation near target give the Bank some breathing room. But this is not a slam dunk call. Inflation risks have increased and the latest Bank of Canada surveys show that expectations are creeping higher.

Stay tuned for our Chief Economist Mark Parsons and Mark Johnson from the rates desk at ATB Cormark Capital Markets who will be discussing what to expect in next week’s Bank of Canada announcement. More to come on this on Friday.  

Answer to the previous trivia question: Alberta is the Canadian province named after Queen Victoria’s fourth daughter, Princess Louise Caroline Alberta.

Today’s trivia question: Who was the first woman to be President and CEO of the Edmonton Chamber of Commerce?