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Canada’s inflation ticked up in September, led by food, rent, and travel, as the Bank of Canada prepares for its next interest rate move.
Inflation jumped higher in September, Statistics Canada said Tuesday, thanks largely to annual changes in gas prices and persistent pressure at the grocery store. Annual inflation accelerated to 2.4% last month, the agency said. That’s a jump of half a percentage point from 1.9% in August and a tick higher than economists’ expectations.
Gasoline prices continue to fall year-over-year due mainly to the removal of the consumer carbon price, though prices at the pumps were up modestly on a monthly basis. With gas prices falling less year-over-year in September than in August, StatCan said that put some fuel in the headline inflation reading.
Consumers are meanwhile facing stubborn pressure at the grocery store. Fresh vegetable prices were up 1.9% annually in September after a decline in August, and sugar and confectionary costs also accelerated to an increase of 9.2% compared to 5.8% the previous month. StatCan noted that annual price hikes at the grocery store have largely trended higher since a recent low in April 2024. Short supplies of beef and coffee are persistent factors fuelling higher prices, the agency said.
Travel tours also saw a rare month-over-month price gain in September as the agency pointed to higher costs for hotels tied to major events in Europe and some parts of the United States.
National rent prices accelerated to 4.8% year over year in September, up from 4.5% in August. Renters have seen price hikes generally decelerate in the past year with some occasional monthly volatility.
Taking some steam out of last month’s inflation figures were smaller annual increases in clothing and footwear prices.
The September inflation report will be the Bank of Canada’s last look at price data before the central bank’s next interest rate decision on Oct. 29. The central bank lowered its benchmark interest rate by a quarter point to 2.5% at its last decision in September. The central bank’s preferred measures of core inflation showed some stubbornness in September, holding above the 3% mark.
The Bank of Canada looks at these figures in an attempt to strip out volatile influences on the headline inflation figures, but monetary policymakers have recently cast some doubt on the reliability of these metrics.
CIBC senior economist Andrew Grantham said in a note to clients Tuesday morning that, looking at a broader array of core inflation measures, September’s underlying price pressures seemed generally in line with August’s readings. Grantham argued that means there was less inflationary pressure to worry about than the headline figure might suggest, setting the Bank of Canada up for a quarter-point cut at its decision next week.
Stephen Brown, deputy chief North America economist at Capital Economics, said in a note to clients that the latest inflation release, paired with the stronger than expected jobs report for September, should tamp down rate cut expectations for the end of the month. But he said Capital Economics is “still leaning toward another rate cut” after Bank of Canada governor Tiff Macklem’s comments citing concern about a soft jobs market last week.
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