Canada Inflation Holds at 3% as Gas Prices Slow — SkimNews
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- Statistics Canada reported the annual inflation rate held at 3% in August, with core measures near the Bank of Canada's 2% target, matching economist forecasts.
- Gasoline prices decelerated to a 22.8% year-over-year rise in August, down from 25.7% the prior month; excluding gasoline, the CPI rose 2.4%.
- Market odds of a Bank of Canada rate hike at the October 28 meeting climbed to 60% as of midday Monday, per LSEG Data & Analytics, despite BMO's Benjamin Reitzes saying the report eases rate-hike speculation.
- Rent inflation accelerated to 2.8% year-over-year in August, up from 2.5% in July, partly offsetting the gasoline slowdown.
- Grocery prices rose 2.8% year-over-year — slower than headline inflation for the first time since July 2024 — led by dairy at just 0.7% in August versus 3.1% in July.
- Travel costs climbed as airlines adjusted to the sharp decline in Canadian travel to the United States in 2025, with rising fuel surcharges cited by StatCan.
- RBC economist Abbey Xu projected the Bank of Canada on hold through 2026 with gradual rate increases beginning in 2027, but warned that if oil stays elevated longer, the risk of energy spillover into broader inflation will be higher.
Why it matters: Canadian households face 60% market-implied odds of a Bank of Canada rate hike at the October 28 meeting alongside accelerating rent inflation at 2.8% year-over-year, according to LSEG. Even with core measures near the BoC's 2% target, RBC warned that persistent elevated oil prices carry a higher risk of energy cost spillover into broader inflation.
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