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Economic News

Quebec: An Inflation Gap with the Rest of the Country Expected to Persist Until Mid-2026

October 21, 2025
Sonny Scarfone
Principal Economist

Highlights

  • In Quebec, the Consumer Price Index (CPI) rose 3.3% year-over-year in September, accelerating from the 2.7% increase recorded in August.
  • This inflation rate is nearly 1 percentage point higher than the national rate, where it stood at 2.4% (see today’s analysis External link.), also up from 1.9% in August.
  • Energy costs account for roughly half of the persistent gap between Quebec and the rest of the country, while the other half mainly reflects dynamics in the rental housing market (table 1).
  • Because of base effects linked to the removal of the carbon tax in the other provinces, the energy component is expected to continue contributing to the gap until next April. As for rents, their strong contribution to inflation could take several months to ease, since adjustments are tied to lease renewals rather than just asking prices for vacant units, which have recently shown little movement or even declines. This contractual dynamic, along with the associated base effects, extends the period during which the year-over-year change in average rents remains elevated, as measured by the CPI.

Comments

Since last spring, inflation in Quebec has diverged from the Canadian average. At 3.3% in September, Quebec’s inflation reached its highest level since March 2024. The gap with the national average is partly due to Quebec being the only province that has not removed its carbon pricing. Another key factor is housing: rent inflation surged 9.3% in Quebec (including 9.2% in Montreal and 8.5% in Quebec City), compared with 4.7% nationally, as most other provinces implemented stricter caps on allowable increases this year.

 

With persistent base effects in the rental market and the continued application of carbon pricing, Quebec’s inflation is expected to remain above the national average until mid-2026. However, beyond these factors, underlying pressures—the ones that guide monetary policy—remain comparable to those in the rest of the country.

Implications

Despite the recent divergence in inflation rates, Quebec’s economic fundamentals remain broadly aligned with those of the rest of Canada. The Bank of Canada therefore does not need to strike a balance between regions, and its nationwide decisions would not conflict with Quebec’s economic situation. We maintain our expectation of a policy rate cut at next week’s meeting.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.