Canada experienced a 3.1 per cent increase in its annual inflation rate in September, as reported by Statistics Canada. This rise has put the Bank of Canada in a challenging position as it prepares for its upcoming rate announcement. The consumer price index saw a 0.1 per cent uptick compared to August, with the spike attributed to heightened benchmark oil prices due to conflicts in the Middle East. Despite this, the shift to more affordable winter gasoline blends provided some relief in September.
CIBC’s chief economist, Avery Shenfeld, highlighted the significant inflation in gasoline prices but noted a lack of inflation in other sectors. Excluding gasoline, consumer prices rose by 2.2 per cent year-over-year in September. Grocery prices also saw an increase, rising by 1.7 per cent compared to the previous year, with a notable decrease in fresh vegetables and the “sugar and confectionary” category.
Shelter prices rose by 1.8 per cent year-over-year, up from 1.5 per cent in August. The core inflation measures by Statistics Canada slightly eased in September, closely monitored by the Bank of Canada. The recent inflation figures have economists emphasizing the need for the central bank to carefully balance its decisions, especially concerning energy-linked inflation and its impact on the broader economy.
Bank of Canada Governor Tiff Macklem warned about the potential inflationary effects of ongoing global energy price hikes due to conflicts in the Middle East. The decision on whether to raise interest rates to manage inflation remains a critical consideration for the Bank. Economists predict that the Bank may hold its rates steady later this month, given the current economic conditions.
RBC economist Abbey Xu highlighted that there is limited evidence of higher energy costs significantly affecting prices in other sectors. The Bank of Canada is expected to maintain its overnight rate unchanged for the rest of 2026 before gradually increasing rates in 2027. Despite recent job declines, policymakers are closely monitoring the economic landscape for any potential inflationary pressures.