Royal Bank of Canada (RBC) strategists Claire Fan and Abbey Xu anticipate that Canada's headline Consumer Price Index (CPI) will remain steady at 3% year-over-year in September. This persistence is primarily driven by higher gasoline and furnace oil prices, which continue to support the overall inflation rate.
The core CPI, which excludes food and energy, is expected to ease slightly to 1.8% in September, down from 2.1% in August. The strategists note that while energy inflation has not significantly passed through to other core components, except for airfares, they will closely monitor transportation categories due to their vulnerability.
RBC's CPI diffusion index, which measures the breadth of inflation pressures, has not yet indicated a widespread broadening of inflation. However, the diffusion index for industrial production prices suggests a concerning spread, though it remains uncertain how quickly these price increases will filter down to consumer prices on store shelves.