Key Takeaways
- Canada’s Consumer Price Index rose 3.0% year over year in August 2026, the same as the previous month, according to Statistics Canada.
- A slowdown in gasoline prices was offset by a sharp uptick in prices for travel tours.
- The trade-war hit to growth could keep the Bank of Canada on hold despite higher inflation, analysts say.
The latest reading on Canadian inflation shows that price pressures are contained but elevated, leaving the Bank of Canada in a holding pattern, economists say.
As reported by Statistics Canada, Canada’s CPI rose 3.0% in August, largely in line with analyst expectations and matching July’s rate. On a monthly basis, consumer prices fell by 0.1% from 0.5% in the prior month, remaining far below the annual high of 1.0% seen in May.
While gasoline prices remained elevated because of renewed Middle East hostilities, they increased at a slower pace of 22.8% in August, down from 25.7% in July, year over year. The moderation in gas price increases was offset by prices for travel tours that jumped 26.1%, compared with a 15.2% year-over-year pace in July, partly owing to a base-year effect, the report said.
The Bank of Canada’s closely monitored core measures of inflation—which leave out volatile items such as gasoline, groceries, and rent—also remained stable for the month. August CPI-trim stood at 1.9%, while CPI-median was at 2.0%, both unchanged from July. Month-over-month core CPI, which excludes only food and energy, rose to 2.1%, from 1.9% the prior month.
Policymakers at the Bank of Canada are due to meet on Oct. 28. Economists expect the bank to leave its interest rate at 2.25%, where it has remained since December 2025. But the overnight index swaps market now assigns a 76% probability of a Bank of Canada hike at its next meeting, up from 70%, following the latest inflation report.
August CPI Report Key Stats
- Month-over-month CPI slid 0.1% from 0.5% in July.
- On an annualized basis, CPI remained flat at 3.0%, matching the prior month.
- CPI-trim held at 1.9%, and CPI-median stood at 2.0%, unchanged from July.
The following are excerpts from analyst commentary on the August CPI report.
Rising Oil Prices Keep Policymakers Anxious
“Nothing here to push the Bank of Canada closer to a rate hike, which should tame market speculation around a potential move in October. While the figures came in as expected, there was plenty of volatility in the details. There was surprise softness in food prices, which fell 0.2% month over month, with steep declines in fresh fruit and vegetables. Unfortunately, gasoline is on pace to rise at least 5% in September, which, if realized, would likely mean an acceleration in headline CPI. That’s going to drive angst among policymakers and concern that it’s just a matter of time before we get some spillover into broader inflation.”
—Benjamin Reitzes, managing director, Canadian rates and macro strategist at BMO Economics
Trade Risk Weighs on Growth, Offsetting Inflation Pressures
“Headline inflation remained elevated in August, but core measures continued to show limited evidence that high energy prices are spilling over into wider inflationary pressure.
“The next Bank of Canada meeting is more than a month away, and there is another CPI report to be released between now and that time, as well as monthly GDP and employment. We continue to expect the bank will remain on hold at that time despite a possible energy-driven reacceleration in headline inflation, due to the downside risks to growth emanating from US trade policy and with core measures of inflation giving policymakers comfort that higher energy prices are not translating into widespread inflationary concerns.”
—Andrew Grantham, senior economist at CIBC Economics
Contained Price Pressures Buy the Bank More Time
“Overall, price pressures appear to have firmed in the third quarter, as evidenced by stronger momentum in core inflation measures. However, the magnitude of the pickup remains contained and does not suggest meaningful second-round effects from the Iran conflict. Combined with weaker growth prospects stemming from tariffs and elevated trade uncertainty, we continue to believe the Bank of Canada will refrain from raising rates in 2026. That said, the balance of risks has shifted modestly to the upside.”
—Dominique Lapointe, senior director, macro strategy at Manulife Investment Management
The Bank to Remain Patient
“All in all, we understand the bank’s caution given higher energy prices and the lack of progress toward resolving the conflict in the Middle East. However, we believe it would be premature to raise rates. Core inflation remains generally contained, while the economy continues to operate with excess capacity and wage pressures remain subdued. Moreover, renewed trade tensions and the temporary boost to growth from FIFA, the Census, the commodities boom and government stimulus suggest we should not take the economy’s resilience for granted. These considerations argue for patience, particularly as rising global long-term interest rates are already creating an additional headwind for the Canadian economy.”
—Matthieu Arseneau, deputy chief economist at National Bank of Canada
No Rate Hike Through Year-End
“The August report was broadly consistent with our base case that the Bank of Canada will hold interest rates through the remainder of 2026 before gradually raising rates in 2027 as the economy strengthens. Risks around that forecast are increasingly tilted toward an earlier hike, particularly if elevated energy prices persist while the economy and labor market continue to recover. But so far, the evidence has been limited, and we will continue to monitor energy pass-through effects closely.”
—Abbey Xu, economist at Royal Bank of Canada
Higher Oil Prices Slightly Lift December Hike Prospect
“RSM Canada’s baseline remains an interest rate hold at 2.25% from the Bank of Canada until the end of 2026 before hiking in the first quarter of 2027. However, the odds of a hike in December rose slightly as the energy shock caused by the war in the Middle East appears to have no end in sight—and oil prices again surpassed USD 100 in September.
“The Bank of Canada cannot control energy prices. Inflation is mostly contained right now, but the longer the energy shock goes on, the more likely inflation will become broad-based. We expect inflation next month to stay above target and near 3.0%. Core inflation remains stable in the meantime, helped by lower prices on housing and food but buoyed by ongoing high energy prices.”
—Tu Nguyen, economist at RSM
