Canada saw a rise in its annual inflation rate to 3.1% in September, as reported by Statistics Canada on Monday. This increase has put the Bank of Canada in a challenging position ahead of its upcoming rate announcement. In September, the consumer price index went up by 0.1% compared to August, driven by escalating benchmark oil prices due to Middle East conflicts. Despite a surge of 27.8% in pump prices year-over-year, the shift to cheaper winter gasoline blends offered some relief. CIBC’s chief economist, Avery Shenfeld, pointed out that aside from gasoline price hikes, other inflation measures are hovering around two percent.
Excluding gasoline, consumer prices rose by 2.2% year-over-year in September. The average price for a liter of regular gasoline in Canada stood at $1.824 last Friday, marking a nearly 33% increase from a year ago. Diesel prices also surged by almost 80% over the past year. Grocery prices climbed by 1.7% year-over-year in September, a slowdown from the 2.8% uptick in August, mainly attributed to lower fresh vegetable costs and reductions in the “sugar and confectionary” category.
Shelter prices increased by 1.8% year-over-year in September, up from 1.5% in August. Statistics Canada’s core inflation measures showed a slight easing on a monthly basis in September, which are closely monitored by the Bank of Canada. Economists noted that the Bank of Canada faces a delicate situation as persistent energy-related inflation could impact other parts of the economy like the job market. Bank of Canada Governor Tiff Macklem warned about the impact of ongoing global energy price hikes due to the Middle East conflicts on the central bank’s inflation outlook.
The Bank of Canada’s latest Business Outlook Survey projects an average inflation of 3.7% over the next year. Concerns about energy market disruptions persist, with uncertainties surrounding oil shipping in the Strait of Hormuz. Despite the challenges, expectations vary among economists, with some predicting a rate hike to mitigate sustained high inflation while others anticipate a hold to prevent adverse economic effects. The Bank of Canada is expected to maintain its current overnight rate for the remainder of 2026 before gradually increasing rates in 2027.