Canada's Inflation Rate Holds Steady at 3% in August

Canada's inflation rate held steady at 3% year-over-year in August, according to Statistics Canada. This matches July's reading and gives the Bank of Canada (BoC) little reason to alter its current interest rate hold.

The BoC's preferred core measures - CPI-trim and CPI-median - also remained close to the 2% target, while measures of inflation breadth were contained. Energy costs, which have been high in recent months, had not yet spread to other areas of the economy.

Major bank economists weighed in on the latest inflation reading. Abbey Xu of Royal Bank of Canada (RBC) said that underlying inflation pressures remained contained and there was limited evidence that elevated energy costs were generating significant second-round inflation.

Xu added that risks around RBC's forecast for the BoC to hold interest rates through 2026 are shifting towards an earlier hike, particularly if energy prices persist while the economy and labour market continue to recover.