Canada’s inflation rate picked up in August but fell a touch short of economist calls, providing a modest momentum for borrowers ahead of the Bank of Canada’s policy decision on September 17.
Consumer price index prices rose 1.9 percent from a year earlier, up from 1.7 percent in July and a notch under the 2 percent consensus.
On the month, the index slipped 0.1 percent, while a seasonally adjusted gauge rose 0.2 percent, underscoring how energy and travel swings can mask underlying momentum.
Excluding gasoline, prices increased 2.4 percent on the year, a step down from the 2.5 percent pace that held through spring and early summer.
The reacceleration came largely because gasoline was less of a drag than in July.
Pump prices were still down 12.7 percent from a year ago, but that decline narrowed meaningfully and prices rose 1.4 percent in August versus July as refining margins edged higher.
Food inflation stayed elevated even as shoppers hunted for deals, with store-bought groceries up in the low single digits and meat prices surging by more than 7 percent year over year.
Those crosscurrents were offset by cheaper travel tours and softer prices for fresh fruit, which helped pull the monthly change into slightly negative territory.
Shelter costs, a flashpoint for households, cooled a bit. The shelter component rose 2.6 percent year over year, easing from 3 percent in July, suggesting some relief from past spikes in mortgage interest and rents.
That moderation will matter for policymakers who have warned that housing-sensitive categories can prolong the last mile back to target.
It also dovetails with evidence of a softer labor backdrop, where the unemployment rate rose to 7.1 percent in August and net employment fell, pointing to more slack in the economy.
Beneath the headline, the Bank of Canada’s preferred core measures sent a mixed but still watchful signal.
The CPI-median held at 3.1 percent and the CPI-trim eased to 3.0 percent, both still above the 2 percent target and well above the Overall inflationrate. That gap reflects lingering breadth in price pressures even as the overall inflation tide recedes.
Policymakers have said they want to see sustained progress in these core metrics before declaring victory. August did not complicate that story, but it also did not deliver a clean break lower.
A headline miss versus expectations, coupled with a mild deceleration in one core metric and softer job market data, keeps a September rate cut firmly on the table.
Traders have been leaning that way for days, and Tuesday’s report is unlikely to reverse those wagers.
The bank cut earlier this year to relieve pressure as growth slowed and disinflation set in; with inflation still below 2 percent on the headline measure and the economy absorbing tariffs uncertainty and weak services activity, the risk of staying restrictive for too long looms larger than it did in the spring.
Regionally, prices accelerated in most provinces, with gasoline doing much of the lifting.
Cellular services, which had been falling sharply, declined at a slower pace in August and even ticked higher on the month as back-to-school promotions proved thinner than last year.
Clothing and footwear posted faster annual gains because of base effects, while airfares continued to slide compared with a year earlier.
The mosaic adds up to a consumer landscape where pockets of stickiness remain but the overall heat level is lower than a year ago.
What matters next is endurance. If core inflation grinds lower through autumn while the labor market stays soft, the Bank of Canada will have room to ease again after any initial step.
If shelter reaccelerates or food proves stubborn, the path will be bumpier.
For households, the August report offers qualified relief: prices are rising more slowly than last year and a bit less than forecasters expected, but everyday costs are still increasing and the destination back to target is not fully in sight.
The next CPI report, covering September, is due October 21.
By then, Canadians will know whether the central bank judged that the balance of risks justified more help for an economy that is cooling without collapsing, and whether August marked the start of a more durable slide in the core measures that matter most to policymakers.
