Canada's August Inflation Rate to Hold Steady at 3% Amid Trade Tensions

Economists expect Canada's inflation rate to remain steady at 3% in August, despite a recent drop in gasoline prices. According to a Reuters poll of economists, the annual inflation rate held at three per cent last month.

The Bank of Canada has been monitoring whether cost pressures from the war in Iran could spark additional inflationary concerns for consumers. However, with the economy moving broadly in line with the bank's forecasts, it opted to keep its key policy rate unchanged at 2.25%.

RBC economists Nathan Janzen and Abbey Xu note that while gas prices were up 23% from a year ago, the trade war between Canada and the United States will likely put some pressure on consumers' wallets later on. They predict gradual hikes in interest rates to come in 2027, but warn that the path forward depends critically on underlying inflation remaining near target.