Canada's Inflation Rate Remains at 3% in August Despite Rising Gas Prices

The annual inflation rate in Canada remained unchanged at 3% in August, as rising gas prices were offset by higher rent and travel tour costs. According to Statistics Canada, gasoline costs continued to rise but at a slower pace, with prices up 22.8% compared to 25.7% a month earlier, due to the ongoing conflict in the Middle East.

Excluding gasoline, consumer prices rose 2.4% last month. Consumers found some relief at the grocery store as food prices rose more slowly than overall inflation for the first time since July 2024, climbing 2.8% year-over-year. Prices for dairy products like cheese and yogurt led the deceleration in grocery prices.

StatCan said dairy prices rose 0.7% in August compared to a 3.1% rise in July. Smaller price hikes for pork, condiments, spices, and vinegars also contributed to the year-over-year slowdown in grocery inflation. Canadians paid less for clothing in August, with annual prices edging down 1.1% last month due to a 2.3% drop in men's clothing prices and a 1.9% decline in children's clothing.

However, Canadians paid more for travel amid rising fuel surcharges and as airlines adjusted to the sharp decline in Canadian travel to the United States in 2025. Rent prices also trended higher, increasing 2.8% year-over-year in August, up from 2.5% in July.

CIBC Economics noted that the headline number remained high in August, but underlying inflation showed few signs that higher energy costs were pushing up prices more broadly. Senior economist Andrew Grantham said that while the Bank of Canada's next interest rate decision is still over a month away, the central bank is expected to keep rates unchanged.