Canada's Inflation Holds Steady at 3% Amid Trade Uncertainty

Canada's inflation rate has been holding steady at 3% for August, keeping it above the Bank of Canada's target of 2%. Despite this, economists say there is no broad acceleration in price pressures that would prompt an immediate interest rate response. Energy prices have remained relatively stable, and food-price pressures are easing.

Andrew DiCapua, principal economist at the Canadian Chamber of Commerce's Business Data Lab, said inflation is 'holding steady as summer comes to a close.' He noted that oil prices were stable in August and food-price pressures eased somewhat. DiCapua also pointed out that most measures that strip out volatile components are steady, while services, particularly travel-related categories, account for some of the upward movement.

Ryan Kirkley, CEO and co-founder of Global Settlement Network, said the 3% headline rate should not be viewed in isolation because much of the inflation pressure remains concentrated in energy. The Bank of Canada's preferred core measures are closer to target. Kirkley argued that the data do not yet point to a broad-based inflation problem that would require an immediate policy response.

CIBC Capital Markets expects the Bank of Canada to remain on hold in October due to uncertainty around trade policy. Avery Shenfeld, CIBC's chief economist, said the bank's base case assumes Canada and the United States will resume talks before year-end, with some tariffs eventually unwound in early 2027.