Canada Inflation Holds at 3%; Food Prices Decelerate — SkimNews
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- Statistics Canada reported Canada's annual inflation rate held at 3% in August, in line with economist forecasts, while gasoline prices rose 22.8% year-over-year — decelerating from 25.7% the prior month — and consumer prices excluding gasoline rose 2.4%
- Food prices climbed 2.8% year-over-year in August, the first time food inflation ran below the overall rate since July 2024, with dairy prices rising just 0.7% versus 3.1% in July
- Rent prices accelerated to 2.8% year-over-year in August from 2.5% in July, while clothing prices fell 1.1% as men's apparel dropped 2.3% and children's clothing declined 1.9%
- Bank of Canada rate-hike odds at the Oct. 28 meeting jumped to 60% per LSEG Data & Analytics, but BMO managing director Benjamin Reitzes said the report contained little to push the central bank toward an increase
- RBC economist Abbey Xu called the data "fairly reassuring" with core measures near the BoC's 2% target, though she warned that if Middle East-driven oil prices stay elevated, energy costs could spill into broader inflation; RBC projects the BoC on hold through 2026 with gradual hikes beginning in 2027
- Atlantic Canada had the highest provincial inflation rates in August, with prices accelerating in Nova Scotia, Prince Edward Island, and Newfoundland and Labrador
Why it matters: The steady 3% print gives the Bank of Canada cover to hold rates at its Oct. 28 meeting despite market-implied 60% odds of a hike, but the 22.8% year-over-year gasoline surge — driven by the Middle East conflict — is the key swing factor: if oil stays elevated, RBC warns energy costs could spill into broader inflation and force the BoC off its projected 2026 pause.
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