Canada's Inflation Stays Steady, BoC Rate Hikes Still Unlikely

The Bank of Canada's (BoC) inflation outlook remains steady, according to RBC economist Abbey Xu. Canadian inflation held at 3% year-over-year in August, with Food and energy components still elevated but easing somewhat.

Core measures such as Consumer Price Index (CPI) excluding food and energy and the BoC's CPI-trim and CPI-median remain near the 2% target. This supports Xu's base case that the Bank of Canada keeps rates unchanged through 2026 before gradual hikes in 2027.

However, persistent Oil strength could tilt risks toward earlier tightening, making underlying price pressures more important than month-to-month movements in headline inflation.