The Good News — and the Catch
Headline CPI has cooled to 2.8 %, but core inflation — excluding food and energy — remains above 3.1 %. Services inflation (rent, insurance, health care) is proving sticky. The Bank of Canada warns the 2 % target may not be reached until mid-2026.
| CPI Component | YoY Change (June 2025) | Share of CPI Basket | Source |
|---|---|---|---|
| Core CPI (ex food & energy) | +3.1 % | 64 % | Statistics Canada |
| Shelter | +5.0 % | 29 % | Statistics Canada |
| Goods | +1.2 % | 36 % | BoC Monetary Policy Report July 2025 |
Implications for Business
- Higher wage expectations. Average hourly earnings up 4.2 %.
- Delayed rate cuts. Overnight rate likely to hold at 4.5 % through Q2 2026.
- Margin compression. Firms unable to pass costs through risk EBIT declines of 2–3 points.
What Leaders Can Do
- Index key contracts. Link multi-year supplier and lease agreements to CPI + productivity metrics.
- Automate cost analytics. Deploy rolling forecasts to anticipate price shocks quarterly.
- Segment pricing. Differentiate inflation recovery by customer profitability.
- Scenario plan for rate persistence. Model balance-sheet impacts at 5 % policy rate through 2026.
Arcus Insight: treat inflation as a continuous variable, not an event. Firms embedding inflation modelling into FP&A systems make 2× faster strategic pivots.