Elevated Canadian headline inflation near 2.7-2.8% year-over-year, driven by persistent oil and gasoline prices amid global supply shocks, has kept the Bank of Canada on alert for upside risks even as core measures hover around 2%. The policy rate has remained at 2.25% through multiple 2026 holds, with recent September employment data showing a 68,000-job drop and unemployment rising to 6.5%, alongside trade tariff uncertainties weighing on growth. These crosscurrents support the 69% market-implied probability of at least one 25-basis-point hike before year-end, as traders price in gradual normalization toward neutral levels despite analyst forecasts favoring a 2027 start. Key near-term catalysts include the October 19 CPI release and the October 28 policy decision.