Canada's Inflation Rate Expected to Hold at 3% Amid Energy Price Concerns

Canada's headline inflation rate is expected to remain steady at 3% year-over-year in August, according to RBC. The Bank of Canada warned that significant spillover from higher energy prices into broader inflation could push policymakers to raise interest rates.

However, actual evidence of this pass-through has been limited beyond the direct impact on gas prices and highly energy-intensive products like airfares. Measures of inflation breadth have been stable, suggesting price pressures remain concentrated in a relatively narrow set of categories.

The central bank's preferred core measures have hovered around the 2% inflation target. The RBC forecast suggests that the Bank of Canada will hold rates through 2026 with gradual hikes following in 2027 contingent on continued improvement in the economy.