Canada Inflation Stuck Above Target as Oil Prices Rise

The Bank of Canada's inflation target of 2% remains out of reach for now as Canada's annual inflation rate held steady at 3% in August, matching July's pace.

Elevated energy costs continued to put pressure on consumers, with gasoline prices still sharply higher from a year earlier despite some relief at the pumps in August. Food-price growth moderated only gradually, with grocery prices rising 3.1% from a year earlier in July, down from 3.9% in June.

The inflation reading keeps policymakers awake as they weigh the competing risks of persistent price pressures and a softer economic outlook. Ryan Kirkley, CEO & Co-Founder of Global Settlement Network, notes that while much of the pressure is still coming from energy, the Bank's preferred core measures remain closer to target.

Oil prices rising again could raise gasoline and transportation costs in the coming months, eventually feeding into prices across the wider economy. Kirkley advises caution when interpreting this inflation print as a shift in the Canadian rate outlook: 'the next few prints should give us a much clearer sense of which path Canada is on.'