Canada's Inflation Rate Expected to Remain Steady in August Despite Oil Price Concerns

Economists predict that Canada's inflation rate remained steady at three per cent in August, despite concerns about the impact of rising oil prices on consumers' wallets. The prediction comes as Statistics Canada prepares to release its latest consumer price index for August on Monday.

According to a Reuters poll of economists, Tu Nguyen from RSM Canada expects the headline number not to go above three per cent last month. Nguyen attributes this stability to the rest of the economy being 'pretty stable' outside of energy prices.

However, Nguyen warns that recent tensions in the Middle East could lead to increased gas prices, which would have a ripple effect on other industries and consumer prices. She notes that 'everything we buy has to go through some transportation channel', making it difficult for businesses to absorb higher costs.

The Bank of Canada has been monitoring the situation closely and has kept its key policy rate unchanged at 2.25 per cent. While some economists, including those from RBC, expect the central bank to hold rates steady for the rest of the year, there is a growing risk that interest rates could be hiked earlier than expected.

The ongoing trade dispute between Canada and the US may also put upward pressure on consumer prices in the months to come. However, Nguyen downplays the impact of retaliatory tariffs, suggesting that consumers can easily substitute Canadian products for imported ones that are not subject to US tariffs.