Higher energy prices drove up inflation in Canada in September, as the Iran and Russia-Ukraine wars continued to strain global refinery capacity.

The Consumer Price Index report, released by Statistics Canada on Monday, showed that overall prices rose 3.1 per cent year-over-year, up from three per cent in August.

The bulk of the increases stemmed from higher energy prices, which were 19 per cent higher compared with the same time last year.

Grocery store prices rose 1.7 per cent year over year in September after increasing by 2.8 per cent in August. It marked the smallest yearly increase since May 2024 and the second consecutive month where grocery price growth increased at a slower pace than the overall inflation rate. Prices declined for fresh vegetables as well as sugar and confectionary items, while the price for beef and “other food preparations” grew at a slower pace.

Shelter prices also rose 1.8 per cent year over year.

Core inflation measures, which exclude volatile components such as energy and food prices, remained stable. CPI-median dipped to 1.9 per cent in September from two per cent in August, while CPI-trim fell to 1.8 per cent in September from 1.9 per cent.

“(The report) was a touch softer than expected … 3.1 per cent is still pretty hot inflation, but core inflation measures are not showing too many signs of increasing in the short term,” said Robert Kavcic, senior economist for BMO Capital Markets, in an interview.

“One thing the Bank of Canada is keeping an eye on is just how broad inflation pressure is spreading, and that doesn’t seem to be spreading all that much either.”

Leslie Preston, managing director and senior economist at TD Bank Group, also said she was “pleasantly surprised” that the overall inflation rate was softer than expected.

“We look at measures at underlying inflation, and what that tells me that Canadians aren’t experiencing very high inflation when you strip away the effects of energy prices,” she said in an interview.

“We do expect core inflation pressures to pick up as businesses likely need to pass on some of these higher costs in their end prices.”

Monday’s data provided the last look at inflation before the Bank of Canada announces its overnight interest rate later this month.

Higher energy prices have lifted inflation past the Bank of Canada’s two per cent target since May, and the overall inflation rate sat at three per cent in July and August.

So far, central bank officials have chosen to look through the direct impact of higher oil prices on inflation and have repeatedly said they’ve seen limited evidence that higher energy costs are spreading broadly to other goods and services.

However, Bank of Canada governor Tiff Macklem told reporters in a call after an International Monetary Fund meeting in Bangkok on Saturday that “with the conflict ongoing, shipments still curtailed, and refinery capacity damage, the risk that inflation broadens and becomes more persistent has gone up.”

“Our beacon is our two per cent inflation target, and we are committed to keeping inflation close to target over time. We’re prepared to adjust monetary policy as needed.”

Economists, however, are split.

BMO Capital Markets still expects the central bank to remain on hold for the rest of the year and into 2027, but Kavcic noted that may change given Macklem’s statements over the weekend.

“It was a bit of surprise. Macklem was clearly hawkish. It’s almost like they’re determining that there’s a pretty good chance they’re just going to go ahead and raise rates in the next couple of months,” he said.

“We’re probably going to see 25 or 50 basis points of rate hikes just off the top to get the bank back to what they consider to be neutral. The timing is a bit of a question: Is there enough urgency there for them to go in October?”

TD’s Preston said that if the central bank does raise rates in October, they would have a hard time justifying it because core inflation is below the two per cent target.

TD’s forecast tables also expect the central bank to remain on hold for the rest of the year and into 2027.

• Inflation risks are rising as oil shock lingers, Macklem says
• How a 'leaky loonie' could raise Bank of Canada interest rates

“It would be tricky for them to justify at this point, but they want to signal that they’re vigilant … I think the other thing that would contribute to them raising rates is, frankly, if the Canadian economy started doing better,” she noted.

“That would kind of be a good news story for why the Bank of Canada might need to raise rates down the line, because then they would be concerned that … domestic strength is going to push inflation pressures higher.”

• Email: ptran@postmedia.com

Businesses and consumers expect inflation to remain elevated in the near-term, as the breakdown in Canada-United States trade negotiations and the conflict in the Middle East continue to put upward pressure on prices and costs.

According to the Bank of Canada ‘s new quarterly Business Outlook Survey (BOS) published on Monday, many business leaders expect Canada’s overall inflation rate to remain above three per cent over the next two years.

Roughly half of firms surveyed said they planned to pass on some or all of their cost increases related to the Iran war and tariffs. Firms that have already passed some of the earlier cost increases planned to continue passing on past increases to customers over the next 12 months.

Businesses also expected their non-labour production costs and selling prices to moderate but remain elevated over the next 12 months.

Canada’s overall inflation rate ticked higher to 3.1 per cent year over year in September from three per cent in August, mainly due to higher energy prices caused by the Iran and Russia-Ukraine wars.

“These pricing plans reflect some improvements in demand as well as firms’ desire to recover margins compressed by earlier cost increases. However, several firms, more than in the previous quarter, also reported that competitive pressures continue to limit their ability to increase prices,” the BOS read.

However, central bank officials noted that many of the BOS responses were collected before trade talks broke down with the U.S. on Aug. 22. Many firms’ outlooks have deteriorated and inflation expectations have increased since then, but they don’t expect them to return to levels seen at the onset of the trade conflict in March 2025 and the peak in global oil prices in April.

Nevertheless, the Bank of Canada said sentiment and expectations remain “considerably stronger” than at the height of trade tensions last year, which suggests a moderation rather than a fundamental shift in firms’ outlooks.

Special consultations conducted in July and August also suggest that firms were adapting to trade tensions by modifying supply chains, increasing spending on technology like artificial intelligence and automation, and looking for new opportunities by diversifying their export markets.

Many firms also reported plans to invest in digital technologies — including artificial intelligence, machinery and automation systems — to improve productivity and efficiencies. However, uncertainty around U.S. trade policy continues to restrain firms’ capital spending plans even if trade tensions were weighing less on near-term sales, and employment intentions remain soft below their historical average.

“Most firms anticipate keeping staffing levels unchanged, often commenting that current levels are sufficient to meet expected demand … Several firms also expect automation and other efficiency improvements to raise productivity, allowing them to meet increases in sales without adding workers,” the BOS said.

Meanwhile, higher fuel prices and tariffs are also putting upward pressure on spending for Canadian households.

According to the new quarterly Canadian Survey of Consumer Expectations (CSCE), which was also published on Monday, the median value suggests many of those surveyed expected inflation to edge up to 4.03 per cent over the next year and 3.88 per cent in the next two years.

Long-term expectations (3.91 per cent) also moved higher this quarter and are now in line with current perceptions of inflation (3.9 per cent).

Respondents continued to cite tariffs and trade tensions as the top factor affecting inflation. Consumers who responded to the survey after the Canada-U.S. talks broke down reported slightly higher inflation expectations at all horizons, and many respondents described how tariffs were raising prices of everyday purchases in follow-up interviews.

Energy prices were also widely cited as a source of inflation, even though the CSCE said fewer respondents mentioned them in the third quarter of 2026 than the previous quarter. Most believe the Iran war will raise inflation over the next 12 months, and several respondents expressed concerns about higher gasoline prices spilling over to other goods and services.

“Consumer spending intentions edged down in the third quarter of 2026 and remain below the survey average. High prices of goods and services remain the top barrier to consumer spending,” the CSCE said.

“Spending intentions continue to be weaker among households that expect the war in the Middle East to significantly raise inflation than among other households.”

Monday’s BOS and CSCE are two key reports that the Bank of Canada’s governing council uses as part of their deliberations about the key interest rate.

The central bank is scheduled to make an interest rate announcement on Oct. 28, along with the publication of a new quarterly Monetary Policy Report.

• Canada's inflation rate rises above 3% on higher energy prices
• Inflation risks are rising as oil shock lingers, Macklem says

• Email: ptran@postmedia.com

Bank of Canada governor Tiff Macklem came across as hawkish in an interview with reporters at an International Monetary Fund meeting and that has economists wondering if policymakers will continue to shrug off above-target inflation.

“The question we’re going to be asking ourselves is, ‘Is inflation likely to come back down towards our target on its own or are we going to have to raise interest rates to influence the path?’” he said this past weekend.

Canada’s headline inflation rose to 3.1 per cent year over year in September, missing estimates of 3.2 per cent, with the increase fuelled by higher prices for gasoline , Statistics Canada said.

The Bank of Canada’s target range for inflation is one per cent to three per cent.

The headline consumer price index (CPI) has been above the central bank’s target for eight of the past nine months, hitting a high of 3.2 per cent in May.

But core measures of inflation, which strip out food and energy, in September slowed to 1.9 per cent month over month and 1.8 per cent year over year from two per cent and 1.9 per cent, respectively.

The Bank of Canada has held its benchmark lending rate at 2.25 per cent for the past seven meetings.

Here’s what economists say the latest inflation data means for the economy, policymakers and interest rates.

‘Stay their hand’: Bank of Montreal

“Markets came into this important inflation reading leaning heavily towards a Bank of Canada hike,” encouraged by Macklem’s comments over the weekend regarding inflation, Douglas Porter, chief economist at Bank of Montreal, said in a note on Monday.

Coupled with a warning about a persistent rate of inflation above target, Macklem also said he expected higher oil prices to boost the coffers of Alberta and the federal government while also improving the prospects for the Canadian economy.

The tame core CPI data, however, won’t give markets betting on an October rate much to chew on as there was “zero evidence” higher gasoline prices have spread beyond the pumps, Porter said.

“Even so, the Bank of Canada seems laser-focused on the persistence of headline inflation above three per cent,” he said.

He said it looks like high headline CPI will stick around given higher prices for oil and other products, such as diesel, but the Bank of Canada tends to look ahead.

“One tame current inflation result won’t necessarily stay their hiking hand,” he said.

‘Uncomfortable balance’: Royal Bank of Canada

“The Bank of Canada is still facing an uncomfortable balance,” Abbey Xu, an economist at Royal Bank of Canada, said in a note on Monday.

She said the economy is improving, but remains soft, as evidenced by the loss of jobs in August and September, which suggests a hold on interest rates. The Bank of Canada, however, is on high alert for any signs that elevated overall inflation is spreading to the wider economy and boosting inflation expectations among consumers.

“Softer labour-market data and higher fixed-borrowing costs give policymakers room to remain patient,” she said.

RBC’s base case is for policymakers to hold rates for the rest of the year and then start hiking next year.

“However, recent communications from the Bank of Canada and governor Macklem are denoting more urgency than the data to date might suggest and add to the risk the Bank of Canada chooses to move preemptively,” she said.

‘Fragile threshold’: KPMG Canada

“The Bank of Canada increasingly faces a difficult trade-off,” Peter Shannon, senior economist at KPMG Canada, said in a note on Monday.

A slowing job market, an economy operating below its potential and weakening population growth are reasons to hold, but oil prices have climbed further since the Bank of Canada’s last rate announcement in early September, so Macklem’s warnings that inflation risks remain high aren’t likely to evaporate.

“Measures of inflation expectations will move up and demands from markets for central banks to prove credibility are also not going away,” he said.

• Canada's inflation rate rises above 3% on higher energy prices
• How a 'leaky loonie' could raise Bank of Canada interest rates

KPMG expects the Bank of Canada to hold rates at its October meeting, with a hike possibly as soon as December.

“We’re still sitting on a fragile threshold, and it won’t take much to cross it,” he said.

• Email: gmvsuhanic@postmedia.com

Hamilton-based Stelco Holdings Inc. sent shockwaves through an already embattled Canadian steel industry when U.S. parent company Cleveland-Cliffs Inc. announced on Sept. 28 it would indefinitely idle its Hamilton plant and lay off hundreds of workers. In response, Industry Minister Mélanie Joly has threatened legal action if Stelco does not preserve its Ontario jobs, citing commitments agreed upon under the Investment Canada Act when Cleveland-Cliffs first assumed ownership of the company. Joly’s moves are the latest development in the growing saga of Stelco, a company with a storied history that has become a flashpoint in the Canada-United States trade war.

What is Stelco and how did it come to be?

Stelco, the Canadian-based steelmaker that helped build Hamilton into “Steel City,” has been around for more than a century. It was originally incorporated in 1910 as the Steel Company of Canada, an amalgamation of five already-existing iron and steel companies: Hamilton Steel and Iron Co.; Montreal Rolling Mills Co.; Canada Screw Co.; Canada Bolt and Nut Co. and Dominion Wire Manufacturing Company.

Hamilton was the ideal base for operations at the time since it was already home to limestone deposits (limestone being a key ingredient in steelmaking) while coal and iron ore could easily be transported by boat to the city’s port, said Marvin Ryder, associate professor at McMaster University’s DeGroote School of Business. During the 1920s, Stelco had grown to become the largest steelmaker in Canada.

The company hit its peak in the 1970s and 1980s, when Stelco employed about 25,000 workers. Stelco’s management later began the shift toward automating more of its steel production and today, though the company still produces plenty of steel, it is no longer one of Hamilton’s biggest employers, Ryder said.

“In a sense, Stelco in Hamilton was hollowed out more than a decade ago,” said Ryder, adding that Stelco stopped producing primary steel at its Hamilton Works facility in 2013.

The facility receives its steel from the Lake Erie Works mill in Nanticoke, about 60 kilometres southwest of Hamilton, coats it in zinc to prevent rusting and rolls it into thin sheets for distribution to other industries, such as the automotive sector, said Ryder. The Hamilton facility also operates coke ovens, which bake coal into a carbon-rich material used to make steel. This coke is then transported to the Nanticoke mill for steel production.

Ryder said the Hamilton workers who operate the coke ovens are not being affected by the layoffs.

What challenges has Stelco faced?

Stelco has faced several financial and labour-related challenges over the decades.

Peter Warrian, a distinguished research fellow at the University of Toronto’s Munk School of Global Affairs & Public Policy, compared the Stelco of old to a Kresge variety store offering an assortment of steel products.

However, by the 1970s demand for specialized steel was growing, and the automotive industry became the biggest buyer of steel, which heralded the beginning of Stelco’s troubles, Warrian said.

In 1980 (the same year the Steel Company of Canada officially changed its name to Stelco, Inc.), Stelco completed construction of its new steel mill in Nanticoke, which cost the company about $870 million at the time. After accumulating so much debt, Stelco got into financial trouble in the 1990s, which is when steel companies began specializing in stronger, lighter steels and Stelco required more capital to finance the transition, Warrian said.

Stelco sought bankruptcy protection in 2004 and completed restructuring in 2006, after selling a number of its businesses, repaying some of its debt, restructuring more than $1.4 billion of pension funding obligations while facing a dramatic uptick in steel prices. An equity sponsorship group rescued Stelco by providing $108 million in exchange for an approximate 70 per cent stake in the company.

In 2007 Stelco was acquired by the United States Steel Corporation for US$1.1 billion, renaming Stelco to U.S. Steel Canada and marking the end of an era for a once independent Canadian operation. At the time, U.S. Steel agreed to certain commitments, including a three-year undertaking to maintain Canadian employment levels, and increase steel production in Canada by at least 10 per cent.

But the 2008 financial crisis led the company to close most of its Canadian operations and lay off 1,500 employees. As a result, the attorney general of Canada filed a lawsuit against U.S. Steel in 2009, a battle that finally culminated in an out-of-court settlement in 2011.

In 2014, U.S. Steel Canada filed for creditor protection and two years later Lindsay Goldberg, a New York-based private equity firm, took over the company, reviving the Stelco name when it was brought back to the Toronto Stock Exchange in 2017. Ryder said the company was able to turn Stelco around before it eventually flipped it to Ohio-based steel manufacturer Cleveland-Cliffs for $3.4 billion in 2024.

Stelco has also dealt with a number of labour conflicts over the years, starting in 1946 with a historic strike over working hours, wages and the right to have a union.

Why has it become a trade war flashpoint?

The global trade war has hit the steel industry particularly hard, with U.S. President Donald Trump raising levies on imported steel to 25 per cent and then 50 per cent in 2025.

Canada’s retaliatory tariffs on steel products from the United States, including semi-finished products, drove up import costs further for components travelling across the border multiple times. “A piece of steel can start as a slab in Hamilton and go across the border four or five times before it goes into an auto part in Oshawa or Detroit,” said Warrian.

In September, Cleveland-Cliffs announced it would indefinitely halt production at Stelco’s manufacturing facility, Hamilton Works, starting Oct. 9, and lay off up to 500 workers across Hamilton and its Lake Erie Works mill in Nanticoke. The company cited a lack of orders to support galvanized and cold-rolled steel production and said most of the affected Hamilton workers would be offered work at the Nanticoke mill instead.

But in early October federal Industry Minister Mélanie Joly sent a letter to Stelco president Paul Simon, expressing “extreme disappointment” over the company’s layoff plan and requesting a plan within five business days for Cleveland-Cliffs to comply with the undertakings made under the original acquisition in 2024. The Canadian government had approved the deal contingent on a package of five-year-long undertakings, including to continue to maintain the number of union jobs and the majority of non-union positions.

Joly also told reporters that Cleveland-Cliffs chief executive Lourenco Goncalves has been supportive of U.S. tariffs on steel and thus cannot say his company’s plan to lay off workers due to the trade war was out of its control.

But Simon said the company would continue with its plans to halt operations at the Hamilton plant, saying Canadian exports of cold-rolled and coated steel to the U.S. have plunged. “The undertakings do not stipulate a commitment to avoid layoffs , nor do they include a requirement that employment levels be above a certain amount on each day of the five years of the undertakings,” Simon wrote in a letter responding to Joly.

Last week, Joly said Stelco could face financial penalties or even a forced sale of its assets in Canada if it moves ahead with layoffs.

“We expect Stelco to follow the undertakings that they’ve committed to, to the Government of Canada, and right now, a business decision or even a change in market conditions cannot be used to not follow the commitment,” Joly told reporters on Oct. 14. “Everything is on the table.”

What comes next?

In the event of a takeover, Warrian suggested the possibility of creating a new entity involving the merging of Stelco with Sault Ste. Marie’s Algoma Steel Inc., Stelco’s top competitor, which has also been hurt in the trade war.

But Ryder said the most likely scenario could be that the federal government takes Cleveland-Cliffs to court for violating the terms of their agreement under the Investment Canada Act to impose financial penalties.

“An easier thing for Cleveland-Cliffs to do would be to rethink their strategy, delay the layoffs, apply for some funding, get their way through it,” he said, but added this could require the company’s chief executive to back down from his public support of Trump’s policies.

Ryder also said it is possible that the 50 per cent U.S. tariffs on imported steel could be struck down in court, which could drive demand for Stelco steel higher again.

The U.S. midterm elections are in about two weeks, he added. “By the end of January, this situation could change quite dramatically for Stelco, and orders that had been cancelled or delayed could suddenly start coming back. Thus, the workers on an indefinite layoff could quickly be called back if those orders reappear.”

Cleveland-Cliffs’ Goncalves said on Oct. 8 that the workers facing layoffs would be recalled if a trade deal between Canada and the U.S. is reached.

• Steel plants are crying for steel even though Stelco has just laid off hundreds of workers
• Cleveland-Cliffs CEO calls Canada’s Stelco threats ‘bullying’

• Email: slouis@postmedia.com

Statistics Canada is scheduled to release September’s Consumer Price Index data today, a last look at inflation before the central bank announces its overnight interest rate later this month.

Higher energy prices have lifted inflation past the Bank of Canada’s two per cent target since May, and the overall inflation rate sat at three per cent in July and August.

Economists largely expect that inflation edged up again in September as Brent crude and West Texas Intermediate crude prices continued to hover at around US$100 per barrel, which raised prices at the pumps for consumers.

An uptick in consumer prices would put more pressure on the Bank of Canada to raise its overnight rate — currently at 2.25 per cent — for the first time in a year.

“To date, the bank has been looking through the direct impact of higher oil prices on inflation. So far we’ve seen limited evidence that these higher energy costs are spreading broadly to other goods and services…. With the conflict ongoing, shipments still curtailed and refinery capacity damage, the risk that inflation broadens and becomes more persistent has gone up,” Bank of Canada governor Tiff Macklem told reporters in a call after an International Monetary Fund meeting in Bangkok on Saturday.

“Our beacon is our two per cent inflation target, and we are committed to keeping inflation close to target over time. We’re prepared to adjust monetary policy as needed.”

Canada has the longest coastline in the world: more than 240,000 kilometres of maritime frontier, three oceans and an Arctic that is becoming more accessible and contested every year. No navy, whatever its budget, can maintain persistent awareness across a geography of this scale using crewed vessels alone. For Canada, maritime autonomy is a geographic necessity.

Overseas, companies are building autonomous vessels that are fundamentally changing the economics of naval warfare. Ukraine’s UForce and Australia’s Ocius have demonstrated that missions once requiring expensive crewed warships can increasingly be carried out by smaller and cheaper autonomous systems. Canada has the talent, industrial capacity and strategic imperative to join them. But so far, it has lacked the opportunity. That may now be changing.

The Royal Canadian Navy has issued a tender for its first operational autonomous surface vessel and has signalled that it doesn’t intend for this to be a typical Canadian defence procurement. Canadian content accounts, directly and indirectly, for 58 per cent of the evaluation criteria. Delivery timelines are aggressive, early delivery is incentivized and industrial consortia are encouraged. Most importantly, the tender asks for innovative solutions and doesn’t prescribe an existing product on the market. The RCN, Department of National Defence and Defence Investment Agency deserve credit for an approach that rewards speed, innovation and Canadian industry.

But the real significance of this tender is what Canada could build from it. The immediate requirement is mine countermeasures: locating naval mines that threaten military and commercial shipping. For a trading nation, keeping international waterways open is an economic and national security imperative. And mine countermeasures are only the start.

The same autonomous vessel could conduct maritime surveillance, search and rescue or counter-drone operations. Its software could be adapted to larger vessels that patrol the Arctic, hunt submarines or protect allied shipping. The hulls, sensors and weapons would be different, but a common system would let them navigate, perceive, coordinate and execute missions. The vessel is the first application. The autonomy is the enduring capability, and it forces a far more consequential decision.

For decades, Canada has measured naval sovereignty by where ships are built, whose steel goes into them and how many Canadian jobs they create. That all matters, but the defining capability of future naval warfare will increasingly reside in software: the systems that fuse sensor data, coordinate platforms and enable autonomous operations. A Canadian-built vessel running on foreign-controlled autonomy software is not fully sovereign.

Autonomy must continuously evolve, accommodating new sensors, threats, communications systems and tactics. It must operate when satellites are unavailable, when navigation is jammed and when vessels need to coordinate across thousands of kilometres. Above all, Canada must be able to modify these systems on its own when circumstances demand it.

Canada has faced this problem before. Its future River-class destroyers will use the American Aegis combat system, acquired through a foreign military sale. Aegis is a proven system, but Canada doesn’t have unrestricted access to its underlying software or the freedom to modify it independently. A central element of our most sophisticated warships will remain subject to foreign-controlled technology and permissions. Our alliances remain essential, but even our closest partners cannot be a substitute for sovereign control of critical military capabilities.

Canada will never manufacture every weapon, sensor or ship component it requires, and it shouldn’t. But buying a foreign weapon is one thing. Depending on foreign-controlled software to determine how our forces perceive, coordinate and act is another. Weapons can be replaced, sensors can be exchanged and hulls can be redesigned. The autonomy and command-and-control architecture that connects an entire fleet must stay in Canadian hands.

This procurement should be the foundation for a Canadian-controlled maritime autonomy architecture: open, modular and adaptable across vessels and capable of integrating allied technologies, with critical intellectual property and development authority held in Canada. The implications reach far beyond a single naval program. This architecture could support Arctic surveillance, maritime security, mine countermeasures and, in time, fleets of autonomous vessels operating across Canada’s oceans.

Autonomy gives Canada something conventional shipbuilding alone cannot: persistent maritime awareness across an enormous geography at an affordable scale. The world is not waiting for us to catch up. Our allies and adversaries are already building the autonomous fleets that will define the next generation of warfare.

The Royal Canadian Navy has taken an important first step. It must now decide whether Canada will buy autonomous vessels or own the technology that powers them. Canada does not need to build every ship. But we must control the systems that tell our ships what to do.

Eliot Pence is the founder and CEO of Dominion Dynamics and co-chair of the Alliance of Canadian Defence Companies. Matt Clancey leads maritime at Dominion and is a CAF veteran.

• Dominion Dynamics teams up to make uncrewed ground vehicles for Ukraine military
• CIBC commits $2 billion to help Canadian defence-related companies grow

Alberta Premier Danielle Smith talks to Financial Post’s Larysa Harapyn about how it’s a “new day” in the province’s relationship with Ottawa on the eve of an important vote .

• Email: lharapyn@postmedia.com

With a trade war battering the economy and the Iran war stoking inflation — it’s not as if the Bank of Canada didn’t have enough to worry about. Now there’s a “leaky loonie.”

The Canadian dollar has “sprung a slow, but fairly steady leak” against the U.S. dollar, said CIBC chief economist Avery Shenfeld in a note.

And if the U.S. Federal Reserve hikes its interest rate this month or in December, the loonie could sink even lower.

Since early last summer, Canada’s currency has lost about 5 per cent of its value, falling as low as 70 U.S. cents this month. It was trading at 70.91 this morning.

Much of the decline has been about the strength of the U.S. dollar, but the loonie has also slid against most other major currencies, sitting at multi-year lows against the British pound, euro and Australian dollar.

This past week, our currency’s effective exchange rate fell to its lowest level since the 2016 oil price shock.

So why is this important to the Bank of Canada , which decides on interest rates Oct. 28?

A weaker exchange rate raises the price of imports, fuelling inflation , and supports growth through cheaper exports — ingredients for tighter monetary policy, said CIBC.

The decline so far, which could potentially add around 0.3 percentage points to inflation, is “clearly nothing to panic over yet,” said Shenfeld.

“That said, it is a reminder that, while the Bank of Canada often lets the Fed do rate hikes that it doesn’t match, if that feeds into a large enough exchange rate depreciation, it can push inflation up enough to spur the BoC into action on rates.”

Capital Economics said the weaker Canadian dollar adds another layer of complication to the central bank’s decision.

Consumer goods import price inflation is already at 8.6 per cent, and further weakness in the currency if the bank does not respond as aggressively as its peers risks pushing it higher still, said Thomas Ryan, senior North American economist at Capital.

Though odds of the bank hiking at the end of the month have fallen below 30 per cent, Ryan thinks policy makers will be reluctant to sound too dovish at upcoming meetings for fear of pushing the loonie even lower.

There is a case where a weak Canadian dollar could benefit the economy, but it’s a worst case. If Canada, U.S. trade tensions escalate and Donald Trump carries out his threat to impose a 50 per cent tariff on Canada’s auto industry on Jan. 1, and at the same time energy prices cool, the Bank of Canada might not be looking at a rate hike next year, but a rate cut.

In that case disinflation in a weaker economy could use the inflationary boost of a lower currency, which would also make exports more competitive.

However, if energy prices stay high, and the Canadian dollar loses more ground to a strong U.S. dollar, the Bank of Canada would be compelled to take a more aggressive line on interest rate hikes, said Shenfeld.

So keep your eye on the loonie for clues on the bank’s upcoming rate decisions — and not just our dollar, but the American dollar as well.

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The BofA Bull & Bear Indicator is no longer flashing sell.

The contrarian index dropped sharply from 8.1 to 7.4 this past week, ending the “sell signal” triggered on May 26. Strategists led by Michael Hartnett said the drop was driven by deteriorating global stock index breadth, bearish hedge fund positions in oil and S&P 500 futures and less bullish positioning in gold futures. Weaker high-yield and emerging market debt flows added to the case.

Hartnett said the summer of “extreme bull sentiment” has come to an end, and expects risk aversion to rule markets in coming weeks as investors look for shelter from higher interest rates and volatility around the U.S. midterm elections and the AI trade.

• Albertans vote today on 10 referendum questions including whether or not to hold a binding referendum on the province leaving Canada.
• The union representing 9,000 workers at Stellantis N.V. releases results of weekend vote on whether to give negotiators a strike mandate. The future of the carmaker’s Brampton, Ont., plant is in doubt.
• The Bank of Canada releases its business outlook survey and its survey of consumer expectations. The central bank decides on interest rates on Oct. 28.
• Today’s Data: Canada’s inflation rate for September, U.S. NAHB Housing Market index
  
• Earnings: Fifth Third Bancorp, W R Berkley Corp., Steel Dynamics Inc.

• ‘We are scared’: Locals say Canadian miner’s Nigerian venture is putting their community at risk
• Brace for a ‘blowtorch winter’: Super El Niño threatens Canadian gas producers and provincial coffers
• Canada to boost immigration points for high-wage earners in bid to drive economic growth

Are you a savvy investor? Well, here’s your chance to prove it. 5i Research founder Peter Hodson puts investors through their paces with a five-question quiz that tests your knowledge on stocks, bonds and more. Don’t worry, you won’t get marked, but there are wrong answers.

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McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com .

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At 12 years old, Deepa started working at a garment factory making clothes for less than one Canadian dollar a week.

For most of her working life, the now 32-year-old southern Indian labourer says she has endured daily abuse from bosses, occasional beatings and little recourse.

That fate changed three years ago.

The key reason is a historic labour contract that followed the death of a garment worker in 2021. Signed in 2022 by a large Indian manufacturer, its workers and major international clothing brands, it was dubbed the Dindigul Agreement, after the southern Indian city where the signing took place.

Historic labour contract

That deal has improved working conditions for two-thirds of garment workers surveyed in factories producing brands sold in Canada such as Disney, Reebok, Tommy Hilfiger, Calvin Klein and U.S. Polo. Collectively, those workers reported fewer harassment cases, better complaint mechanisms and improved treatment from male colleagues and factory bosses, according to a survey of nearly 1,100 Indian garment workers conducted by researchers at Simon Fraser University (SFU) and Lead at Krea University, a research centre in India. This research was shared exclusively with the Investigative Journalism Bureau (IJB).

Of the workers surveyed, more than 80 per cent reported there has been more respect in the workplace compared to three years ago. And 87 per cent of workers reported increased wages in the same time frame.

But this proven model for protecting the people who make many of our clothes in Canada and the West faces a new challenge: major clothing brands appear to be pulling out of the agreement or are unwilling to sign on to similar ones in the future.

Since the Dindigul Agreement’s initial term expired in October 2025, there has been little interest from major clothing brands in agreements like it. Major Canadian players such as Lululemon and Aritzia were not signatories to Dindigul and have not apparently signed on to similar enforceable brand agreements with factories that make their clothes.

Factory executives in Dindigul say they have struggled to secure or continue doing business with brands since signing the agreement.

Even the clothing brands that did sign the Dindigul agreement — including H&M and PVH (which owns Calvin Klein and Tommy Hilfiger) — no longer source from there, according to their supplier lists.

“We believe the brands want to stay away from factories where there is a binding agreement with trade unions or labour groups,” said Alagesan Senniappan, executive vice-president of quality assurance for Eastman Exports, which owns the Dindigul factory.

Senniappan said eight or nine brands declined to work with the factory after the death of the employee in 2021. Even when it signed on to the Dindigul agreement a year later and conditions dramatically improved, most of those brands never came back.

“We have a gold standard in our facilities, but that was not rewarded with the orders,” he said. “It has been a challenge.”

PVH declined to comment about the Dindigul agreement, including why it did not renew the agreement and whether it would be open to signing a similar one in the future.

An unattributed statement from H&M said, “We continue to work on the prevention of gender-based violence and harassment in our supply chain in India and globally with trade unions and experts.” H&M did not commit to signing a similar agreement in the future.

Disney did not comment on detailed questions from reporters about the agreement or improved working conditions; instead, it directed IJB reporters to its supplier code of conduct, which includes protecting human and labour rights for factory workers.

U.S. Polo spokesperson Stacey Kovalsky said, “We take the safety and dignity of workers across our global supply chain very seriously.”

An unattributed statement from Aritzia, which did not sign the original agreement, said the Vancouver-based company is “committed to respecting and upholding human rights throughout our value chain, in line with international standards and industry best practices,” including “seeking to make our products ethically and responsibly, and amplifying workers’ voices.”

The company did not comment on whether it would sign a Dindigul-style agreement in the future.

Canadian athletic retailer Lululemon, also not an original signatory, did not respond to interview requests. Reebok also did not respond.

Genevieve LeBaron, an expert on forced labour who is based at Simon Fraser University in British Columbia, and a lead researcher on the study, believes the reluctance of brands to build on the Dindigul agreement “says a lot about where their priorities are.”

“Companies’ primary goal is to make money … They would much rather be part of supply chain initiatives that are less successful, but cost them less, have less power for unions and workers and don’t require anything of them.”

Noah Dobin-Bernstein, garment programs director of U.S.-based Global Labor Justice (GLJ), says it’s disappointing to see so few brands taking active steps to embrace Dindigul-style agreements that seek to improve garment worker conditions.

“(Brands) are still hoping to maintain the fiction that they do not have an employer relationship or responsibility of any sort for the workers in their supply chains,” he said. “Given the margins in the industry … it would be a relatively small investment to eliminate a known gender-based violence problem.”

The extent to which Canadian brands embrace or reject the worker protections woven into Dindigul-style agreements is difficult to understand due to a lack of supply chain transparency.

Of the 25 Canadian clothing brands reviewed by the IJB, only 10 publicly disclose the factories from which they source garments. No laws in Canada require them to do so.

“You should (be able to) go to your store … and take a picture of the label with your phone and you should be able to see the factory in which it was made,” said Sarosh Kuruvilla, a Cornell University Professor and the director of the Global Labor Institute.

“That kind of transparency is what is required in the long run. And firms are not that transparent.”

Harsh treatment and low wages

The vast majority of garment workers in the global $2.5 trillion-dollar CAD apparel industry toil on factory floors through harsh treatment and low wages, producing the big-name brand T-shirts, jeans, jackets and other clothing sold on Canadian store shelves.

In extreme cases, the harassment has allegedly ended in rape or murder.

In February 2021, a 20-year-old factory worker named Jeyasre Kathiravel was allegedly raped and killed by her supervisor at an Eastman Exports factory in Dindigul. Kathiravel had reportedly suffered months of sexual harassment and intimidation, according to a local union.

The supervisor reportedly confessed to the crime and was subsequently jailed to await trial, according to local news reports.

Soon, a campaign targeted the clothing brands that sourced from Eastman factories: H&M, Gap and PVH. In a rare turn of events, the brands came to the table to negotiate with unions representing the workers and the factory.

The Dindigul Agreement was a legally binding contract that forced brands to impose financial consequences if the factory failed to fix violations of workers’ rights.

It empowered women to pursue a grievance process when they face abuse or harassment, which the companies must take seriously. The unions provided training to workers and upper management, while worker-elected shop floor monitors were put in place to manage and resolve worker grievances.

The new survey data shows that even factories in the region not part of the Dindigul agreement have seen widespread improvements in the treatment of workers.

“The headline is: ‘It works,’” said SFU’s LeBaron. “With a problem like gender-based violence, people have tried many things for 20, 30 years and nothing works … This worker-led initiative in a very short time period made very significant improvements.”

More than half of respondents said they noticed changes with respect to gender-based violence and harassment at work in that time.

“Now there are places to complain, so men are scared and don’t harass,” one worker told researchers.

A garment worker in Tirupur in southern India said “men are now a little more cautious … and women feel a bit safer. Earlier it was not like this.”

Advocates hope other similar agreements emerge to protect workers.

In 2024, two factories in Central Java, Indonesia, modelled an agreement directly after Dindigul following multiple reports of widespread gender-based abuses.

Overwhelmingly, however, labour researchers say, protections for factory workers are missing engagement from brands.

In October 2025, Paramasivam Pushpalatha was working at a Brandix factory in Avissawella, Sri Lanka, when she reportedly started to feel ill. She asked to leave but was denied, according to a local union and GLJ. Pushpalatha later died in hospital due to an apparent heart attack.

“This incident could have been avoided if management had taken the right measures. This is a preventable death,” said Abiramy Sivalogananthan, a South Asia regional coordinator for the organization Asia Floor Wage Alliance (AFWA).

Brandix denied that any employee negligence played a role in Pushpalatha’s death. It showed IJB reporters clips of CCTV footage that appear to show her working on the factory floor and walking to seek medical attention soon before being rushed to hospital.

Victoria’s Secret is the largest buyer from Brandix factories in Sri Lanka, but Dobin-Bernstein said the brand has not responded or met with the union.

An emailed statement from Victoria’s Secret says, “We have clear, enforceable standards and do not tolerate harassment, intimidation, or retaliation of any kind. These expectations have been reinforced directly with Brandix, and we remain committed to protecting workers’ fundamental rights, including freedom of association.” The brand did not comment on whether it has met with the local union.

Lululemon, a Canadian brand headquartered in Vancouver, is among the brands that source from Brandix in Sri Lanka, according to its supply chain disclosures. Aritzia said it has not sourced from Brandix since 2024.

Lululemon did not respond to a request for comment.

Brandix has not committed to adopting an agreement like the one in Dindigul.

“We would be happy to look at what Dindigul offers,” said Darshana Abayasingha, general manager of corporate affairs at Brandix. “We’re definitely open to seeing what we can do better to enhance employee conditions … But having said that, we are already at a fairly high compliance stage.”

• Big clothing brands squeezing Bangladeshi suppliers to offset inflation, study alleges
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It has been a year since the Dindigul agreement expired. Some hope that its effects will last.

“Brands need to be willing to act before more workers lose their lives,” SFU’s LeBaron said. “I hope (this research) helps brands shift their thinking.”

The Investigative Journalism Bureau (IJB) at the University of Toronto’s Dalla Lana School of Public Health is a collaborative investigative newsroom supported by Postmedia that partners with academics, researchers and journalists while training the next generation of investigative reporters.

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