Canada's consumer price index rose 3.0% year-over-year in August, matching July's pace and sitting at the upper edge of the Bank of Canada's 1% to 3% inflation control range; on a seasonally unadjusted basis, the index edged down 0.1% month-over-month. Narrower gains in gasoline prices and slower food inflation applied downward pressure, but increases in items such as travel and rent offset those effects.

Gasoline price growth moderated while travel costs continued to climb. Data released by Statistics Canada on September 14 showed gasoline prices up 22.8% year-over-year in August, a slowdown from July's 25.7% increase, and down 0.9% on a monthly basis. Excluding gasoline, overall CPI rose 2.4% year-over-year, accelerating from 2.2% in July. Tour package prices jumped 26.1% year-over-year, compared with a 15.2% gain in July. The agency noted that a low base from reduced Canadian travel to the United States in the same period last year, along with surcharges tied to higher aviation fuel costs, contributed to the elevated annual figure. However, tour package prices declined 2.9% month-over-month in August.

Housing costs increased 1.5% year-over-year, with rent growth expanding to 2.8% from 2.5%, driven primarily by rising rents in Manitoba and Ontario. Food inflation fell below the overall CPI. Grocery prices rose 2.8% year-over-year, down from 3.1% in July, marking the first time since July 2024 that grocery inflation has run below the headline CPI. Dairy product price gains slowed to 0.7% from 3.1%, with pork, condiments, and fresh fruit also seeing more moderate increases. Still, grocery prices are up 29.0% cumulatively compared with August 2021, meaning real living costs for Canadians remain notably higher than five years ago.

Regional inflation differences continued to reflect energy mix variations. Atlantic provinces recorded the highest inflation rates in the country, where fuel oil and other heating fuels, which are more commonly used locally, surged 43.7% year-over-year. The Bank of Canada's two preferred core measures stayed close to 2%. The CPI median gauge rose 2.0% year-over-year in August, unchanged from July, while the trimmed mean indicator held at 1.9%. Averaging roughly 2.0%, these readings suggest gasoline and travel prices have not yet translated into broad, sustained underlying inflation pressure.

The Bank of Canada held its policy rate at 2.25% on September 2. At the time, the central bank stated that energy prices had pushed headline inflation to around 3%, but underlying price pressures remained broadly contained, while geopolitical and trade developments had increased upside risks to the inflation outlook. TD Economics assessed that the August data does not support the more aggressive monetary policy tightening expectations that markets had previously priced in. The research unit noted that while near-term core price momentum has strengthened somewhat, Canada's moderate economic growth suggests core inflation is expected to stay within the central bank's acceptable range. Statistics Canada is scheduled to release September CPI data on October 19.