Canada's CPI Holds Steady at 3%, Supporting Interest Rate Stability
Canada's Consumer Price Index (CPI) held steady at 3% in August, with core indicators approaching the 2% target. This stability supports the view that the Bank of Canada will keep interest rates unchanged throughout 2026.
The USD/CAD pair has posted four consecutive daily gains, currently trading above 1.3900. The strengthening U.S. dollar has limited the upside potential for USD/CAD, despite oil prices reaching their highest level since May 21 due to tensions between the United States and Iran and conflicts in the Strait of Hormuz.
Economists at prominent institutions expect the Bank of Canada to hold rates steady throughout 2026, with little evidence that high energy costs are generating significant second-round inflation effects. The stability in August inflation data provides the Bank of Canada with clear policy room.