Canada's Inflation Rate Holds Steady at Three Percent in August

Canada's annual inflation rate held steady at three percent in August, according to Statistics Canada. This was despite slower growth in gasoline prices, which rose 22.8% year over year compared to a 25.7% increase in July.

The Consumer Price Index (CPI) matched July's three percent increase, with the biggest upward pressure coming from travel tours and rent. Prices for travel tours rose 26.1% year over year in August, up from a 15.2% increase in July, partly due to a base-year effect.

Higher jet fuel prices and fuel surcharges also put upward pressure on the travel tours index, but prices fell 2.9% on a monthly basis in August. Rent prices accelerated, rising 2.8% year over year in August after a 2.5% increase in July, driven by higher rent prices in Manitoba and Ontario.

Consumers found some relief at the grocery store, where food purchased from stores rose only 2.8% year over year in August, down from 3.1% in July. Dairy products led the slowdown in grocery inflation, with cheese and yogurt being major contributors to the deceleration.

CIBC Economics' senior economist Andrew Grantham said that despite the high headline number, underlying inflation showed few signs of higher energy costs pushing prices up more broadly. He expects the Bank of Canada to remain on hold at its next interest rate decision due to downside risks to growth emanating from U.S. trade policy and core measures of inflation.