Canada's Inflation Rate Expected to Hold Steady at Three Percent

Economists expect Canada's annual inflation rate to hold steady at three percent in August, according to a Reuters poll. The forecast comes as gasoline prices have dropped from earlier in the summer, following less turbulent hostilities between Iran and the United States. However, gas prices remain up 23 percent from last year.

Tu Nguyen, an economist at RSM Canada, noted that while the war in Iran has driven energy price volatility, it's had a limited impact on broader inflation beyond direct effects on gasoline and highly energy-intensive products like airfares.

The Bank of Canada left its key policy rate unchanged at 2.25 percent earlier this month, citing stable measures of inflation breadth despite concerns about the war in Iran's potential to spark additional inflationary pressures. RBC economists predict that the central bank will hold rates steady for the rest of the year before gradual hikes come in 2027.

The ongoing trade dispute between Canada and the United States may also put upward pressure on consumer prices, but Nguyen cautions that retaliatory tariffs are unlikely to have a significant impact on inflation overall. She notes that many products subject to tariffs have substitutes available from other countries, reducing their effect on household budgets.