Businesses Can Absorb Inflation Costs, CIBC Says
A CIBC Capital Markets report argues Canadian firms can keep cost increases off consumers' price tags as the Bank of Canada raises rates.
Updated on Nov. 10, 2026 in Inflation
Live Poll
Do you expect prices for everyday goods to keep rising over the next year?
CIBC Capital Markets published a report suggesting Canadian businesses can absorb inflation cost increases. The Bank of Canada raised its policy interest rate by 0.2 percentage points to 2.5 per cent, its first change in a year.
Why it matters
The report says firms absorb costs through higher profit margins rather than passing them on, a pattern that could keep consumer prices from rising further. Canada's inflation rate was 3.1 per cent in September, and the Bank raised rates to keep higher energy prices from spreading to other goods and services.
The Bank of Canada raised its policy rate to 2.5 per cent, with inflation at 3.1 per cent in September and unemployment near 6.7 per cent in October 2026. Whether inflation stays above three per cent in 2027 depends on labour market conditions and income growth, which remain uncertain.
The players
CIBC Capital Markets
The capital markets arm of CIBC, one of Canada's largest banks, which published the report on business cost absorption.
Bank of Canada
Canada's central bank, which sets the country's policy interest rate and aims to keep inflation near its target.
The details
CIBC Capital Markets argues that retail profit margins, already above the decade-ago average, give firms room to absorb rising costs. Imported consumer goods are up about 8.9 per cent, and higher energy prices linked to the Iran war are spreading to other goods and services.
Timeline
2022: Unemployment was 5.5 per cent amid Russia's invasion of Ukraine.
September 2026: Canada's inflation rate was measured at 3.1 per cent.
October 2026: Unemployment was about 6.7 per cent.
Two weeks before November 10, 2026: The Bank of Canada raised its rate to 2.5 per cent.
Economic Context
The Bank of Canada's inflation-targeting framework requires it to act when price pressures persist, which is why this rate increase follows the first hike in three years. The question is whether firms keep absorbing costs as that framework tightens financial conditions.
Households may face slower price growth if businesses keep absorbing costs, but higher borrowing rates will raise payments on variable-rate loans. Canadians should watch grocery and goods prices as the Bank's policy takes effect.
The takeaway
Higher profit margins can temporarily shield consumers from inflation, but that cushion depends on steady labour markets and income growth. Watch the next Bank of Canada decisions for signs of whether price pressures ease.
Further reading
For broader context on price trends, see Inflation coverage across Canada.
Live Poll
Do you expect prices for everyday goods to keep rising over the next year?
