Canada's annual inflation rate edged up to 3.1% in September, driven largely by surging fuel prices amid ongoing Middle East tensions. Gasoline costs rose 27.8% year-over-year, accelerating from August's 22.8% increase, while fuel oil prices jumped 57.8%, up from 43.7%. The energy index climbed 19%, with transportation costs also rising 8.4%. The inflation spike was most acute in Atlantic Canada, where many households rely on oil for heating.
Grocery prices showed some relief, increasing just 1.7% annually, the smallest rise since May 2024. Fresh vegetables fell 2.9%, and sugar and confectionery dropped 2.7%. However, beef prices climbed 8.7%, though this was a slight improvement from August's 11% increase. Overall, grocery costs remain 33% higher than in September 2020.
Shelter costs rose 1.8%, led by a 4.9% increase in home and mortgage insurance and a 1.2% rise in home maintenance expenses. Rent increased 2.8%, while mortgage interest costs dipped 0.2%. Excluding energy, Nova Scotia saw the fastest price growth in Atlantic Canada at 3.3%. The headline inflation rate came in below forecasts of 3.2%, with seasonally adjusted prices rising 0.4% from August.
The Bank of Canada is set to announce its policy rate on October 28, currently at 2.25%. Markets anticipate a quarter-point hike by year-end, despite the central bank's July projection that inflation would ease to around 2.5% in the second half of 2026. Governor Tiff Macklem cautioned that sustained high global energy prices will likely keep inflation elevated.