Too Many Canadian Companies Still Planning to Raise Prices, Says Laurentian Bank

01:33 PM EDT, 09/11/2025 (MT Newswires) -- Even with weak real GDP momentum and further deterioration of labor market conditions, surveys show that Canadian consumer price index inflation is unlikely to fall "significantly," said Laurentian Bank Securities.

This rules out a 50 basis points cut in a single meeting or a Bank of Canada terminal rate closer to 1.0%-1.5%, noted the bank. Instead, surveys point to the continuous "stickiness" of underlying inflation.

A reliable indicator of total and core CPI inflation turning points is the Survey on Business Conditions from Statistics Canada, stated Laurentian Bank. The latest Q3 results signal an acceleration of inflationary pressures. 26% of businesses plan to raise prices over the next 12 months -- slightly more than in early 2025 and 2024.

Additionally, 39% of businesses intend to pass on tariff-related costs, substantially up from 24%, previously.

In addition, the Canadian Federation of Independent Businesses (CFIB) reports the average price increase intention remains elevated, at 2.7%. Moreover, as of July, 40% of items in the CPI basket rose more than 3% year over year -- the highest level since the early 2010s, excluding the pandemic period, when inflation was mostly driven by excessive demand outpacing unusually high supply-driven inflation.

Even though U.S. tariff-related price impacts are expected to affect U.S. consumers more than Canadian ones in the coming months, the bank can infer from the San Francisco Federal Reserve's Supply-and Demand-Driven PCE Inflation report that goods CPI inflation excluding energy in Canada is mainly supply-driven this year.

This has altered the traditional link between Canada's output gap and CPI inflation, limiting the magnitude of monetary easing going forward, according to Laurentian Bank.

The lingering psychological impact of pandemic-era inflation calls for prudence during this upcoming easing phase. Canadians are wary of reliving another period of rapid increase in the cost of living, added the bank.

According to the BoC's consumer expectations survey, about 60% of Canadians plan to reduce spending due to inflation concerns. Additional policy rate cuts could further fuel inflation expectations already above 3% across the one- to five-year horizon.

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