Canada Inflation Holds Steady at 3% Amid Rising Oil Prices

Canada's annual inflation rate held steady at 3% in August, matching July's pace. The reading keeps inflation above the Bank of Canada's 2% target and comes as the central bank weighs competing risks.

The Bank of Canada held its policy rate at 2.25% earlier this month, its seventh consecutive decision without a change. Higher gasoline prices have remained a key driver of headline inflation, with gasoline prices still up sharply from a year earlier despite some relief at the pumps in August.

According to Ryan Kirkley, CEO & Co-Founder of Global Settlement Network, 'Canada's 3% headline inflation rate will naturally attract attention, but I think the more important story sits underneath that number.' He notes that much of the pressure is still coming from energy while the Bank of Canada's preferred core measures remain much closer to target.

However, the inflation picture may face fresh pressure in coming months as crude oil prices have climbed toward and above $100 a barrel. This could raise gasoline and transportation costs and eventually feed into prices across the wider economy if elevated energy prices persist.