Canada's inflation rate rises to 3.1 percent as gas prices spike

OTTAWA · Canada's annual inflation rate increased to 3.1 percent in September, Statistics Canada reported Monday. The rise was led by a 27.8 percent jump in gasoline prices compared to a year earlier. Economists had broadly expected an acceleration to 3.2 percent, up from three percent in August. The data puts pressure on the Bank of Canada ahead of its next interest rate decision on Oct. 28.

Excluding gasoline, consumer prices rose 2.2 percent year over year, a slowdown from the 2.4 percent increase in August. BMO chief economist Douglas Porter said the run-up in prices is not spreading widely. "The fact that a lot of measures of core inflation are holding steady at around two per cent suggests that the run-up in prices really is not spreading far and wide beyond the gasoline pump," he said. Porter added the report "does nothing to advance the case for interest rate hikes."

Core inflation measures, which filter out volatile items, eased slightly. The CPI-trim measure fell to 1.8 percent from 1.9 percent, while CPI-median declined to 1.9 percent from two percent. Grocery price increases also moderated, with food from stores up 1.7 percent, the smallest yearly rise since May 2024. Prices for fresh vegetables fell 2.9 percent and sugar items dropped 2.7 percent.

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Regional inflation showed extreme variations. Inflation in all three Maritime provinces was above five percent, driven by a 57.8 percent surge in fuel oil costs. In Ontario, inflation was 2.5 percent, the lowest in the country. Porter said the gaps reflect differences in housing markets and trade pressure. "We've got some really extreme regional variations across the country, and it's showing up in the inflation numbers," he said.

Other notable price changes included a 19.4 percent surge in airline ticket prices due to jet fuel costs. Tuition fees rose 2.4 percent in their yearly update. Beef prices increased 8.7 percent, a slower pace than the previous month. Despite recent slowdowns, grocery prices have risen 33 percent since September 2020. Andrew Grantham of CIBC Capital Markets said the inflation report suggests policymakers can wait. He noted Bank of Canada governor Tiff Macklem's recent "hawkish tone" had raised expectations for a rate hike. The report "suggests that there is little rush and policymakers can take more time to assess how U.S. trade relations and the impact of new tariffs develop before raising rates," Grantham wrote.

Macklem, speaking from Thailand on Saturday, warned high energy prices raise inflation risks. He said the central bank was prepared to raise rates if needed. Macklem noted global economic resilience is "under strain" from persistent shocks like the Middle East conflict. "You can only release strategic energy, oil reserves so many times, but that has helped contain this energy price shock," he said.

With files from The Canadian Press and BNN Bloomberg