Sticky headline inflation and rising tariff risks could give the Bank of Canada pause in October
Canada's Consumer Price Index (CPI) held at 3% year over year in August for a second consecutive month, Statistics Canada reported Monday. That's a steady headline that may already be outdated by the time the Bank of Canada (BoC) meets for its October 28 rate decision.
The reading matched July's print and met economists' forecasts compiled by LSEG Data & Analytics. On a monthly basis, prices slipped 0.1%, though on a seasonally adjusted basis they edged up 0.2%.
Excluding gasoline, the CPI rose 2.4% in August after increasing 2.2% in July, according to Statistics Canada.
Core measures hold steady beneath the surface
The BoC's two preferred core gauges — the ones that matter most to rate decisions — remained near the central bank's 2% midpoint target.
CPI-trim held at 1.9% annually and CPI-median at 2.0%, both consistent with the readings that have supported a prolonged hold at 2.25%.
The central bank confirmed that stance on September 2 with its seventh consecutive hold.
Gasoline prices rose 22.8% year over year in August, easing from July's 25.7% increase as Middle East hostilities continued to underpin energy costs. The deceleration offered modest relief, but was offset by a sharp rise in travel tour prices, which jumped 26.1% year over year, up from 15.2% in July.
Statistics Canada attributed the acceleration to a base-year effect: Canadian travel to the United States fell sharply in 2025, suppressing tour prices in that period. That effect has now run its course.
Shelter costs crept higher. Rent rose 2.8% nationally in August compared with 2.5% in July, driven by acceleration in Manitoba and Ontario.
Grocery price growth, however, dropped below the headline rate for the first time since July 2024, rising 2.8% after a 3.1% increase the prior month.
Dairy products led the deceleration, with prices rising just 0.7% year over year compared with 3.1% in July.
What brokers need to watch before October 28
Taken in isolation, August's steady print gives the BoC limited reason to deviate from its prolonged pause. But September carries a different kind of risk.
Brent crude crossed US$100 per barrel this month, and the full September effect of Donald Trump's new 50% tariffs, alongside Canada's retaliatory measures, has yet to appear in any CPI release.
Following the September 2 hold, Bay Street economists grew noticeably more hawkish about the rate outlook, with at least one analyst flagging December as a live possibility for a rate increase for the first time in this cycle.
The language from Bay Street has already shifted how mortgage professionals are framing rate conversations with clients.
Leah Zlatkin, a licensed mortgage broker and LowestRates.ca expert, told Canadian Mortgage Professional earlier this year that "there's no clear signal that rates are heading materially lower, and in some cases we're already seeing lenders adjust pricing upward."
Doug Porter, chief economist at BMO Capital Markets in Toronto, flagged a similar note of caution when reacting to Canada's Q2 2026 GDP rebound: stronger numbers "offer no shelter from what is coming."
The October 28 decision will be accompanied by a Monetary Policy Report (MPR), making it the most consequential BoC meeting of the second half of 2026.
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