Canada's Inflation Rate Holds Steady at 3% Amid Energy Price Volatility
Canada's inflation rate remains steady at 3% despite lower energy prices in some areas. The country's consumer price index (CPI) rose by 3% on a year-over-year basis in August, matching July's number.
The main driver of the 3% headline number is higher prices for travel tours, which increased by 26.1% due to higher jet fuel costs and the base year effect. Travel tour prices dropped sharply in 2025, putting downward pressure on prices, but have since stabilized.
The Bank of Canada's baseline remains an interest rate hold at 2.25% until the end of 2026, before hiking in the first quarter of 2027. However, the odds of a hike in December rose slightly due to the ongoing energy shock caused by the seven-month war in the Middle East.
The Bank of Canada cannot control energy prices, and inflation is mostly contained right now. But the longer the energy shock continues, the more likely inflation will become broad-based.