Canadian Inflation Holds Steady, but Services Remain a Concern

Canada's inflation picture remains stable for now, as the annual rate held at 3% in August. This keeps price pressures above the Bank of Canada's 2% target, but analysts say there is little evidence of a broad acceleration that would force policymakers to raise interest rates immediately.

Economists point to relatively stable energy prices and easing food-price pressures as contributing factors. However, services remain an area to watch, with travel-related categories showing some upward movement.

Andrew DiCapua, principal economist at the Canadian Chamber of Commerce's Business Data Lab, notes that inflation is 'holding steady as summer comes to a close.' He identifies gasoline prices as the biggest risk to higher headline inflation over the next few months.

Ryan Kirkley, CEO and co-founder of Global Settlement Network, agrees that much of the inflation pressure remains concentrated in energy. He argues that the data do not yet point to a broad-based inflation problem requiring an immediate policy response.

CIBC Capital Markets expects the Bank of Canada to remain on hold in October due to uncertainty around trade policy. Avery Shenfeld, CIBC's chief economist, notes that the bank's base case assumes Canada and the United States will resume talks before year-end, with some tariffs eventually unwound in early 2027.