Headline inflation rose 1.9% in August from a 12 months earlier, up from 1.7% in July however nonetheless beneath economists’ expectations, Statistics Canada reported Tuesday. Costs slipped 0.1% from July, whereas core inflation edged right down to 2.4% from 2.5%.
Extra importantly, the Financial institution of Canada’s most well-liked core measures—designed to strip out unstable elements—remained elevated. CPI-trim edged down 0.1 share level to three.0%, whereas CPI-median held at 3.1% for a 3rd straight month.
TD Economics’ Andrew Hencic mentioned the report confirmed “momentum in the fitting path,” helped by a smaller-than-expected affect from greater power costs.
BMO chief economist Douglas Porter described it as a “low-drama affair,” noting that the important thing inflation measures rose “a tame 0.2% m/m (or much less) in seasonally adjusted phrases.”
Fee minimize already priced in, with future strikes nonetheless in play
This morning’s CPI launch was the final main information level earlier than the Financial institution of Canada’s charge determination tomorrow.
Scotiabank’s Derek Holt argued there was a “very excessive bar” for the CPI launch to matter, nonetheless, including that it shouldn’t. He mentioned the Financial institution’s decision-making is already nicely superior and that core gauges akin to CPI-trim and CPI-median stay its key guideposts. The central financial institution, he added, is targeted extra on forward-looking dangers and traits than on a single month’s information.
Economists usually noticed the dip in core inflation as a secondary issue, however agreed the Financial institution of Canada is ready to chop charges tomorrow given the broader financial backdrop.
Hencic mentioned the Financial institution has “room to chop at its assembly tomorrow,” citing rising unemployment and job losses. Porter additionally mentioned the BoC is “on observe for a charge minimize at tomorrow’s determination,” although he famous that traits in core inflation will assist form the dialogue round further strikes.
“The milder underlying short-term traits in core, alongside the current weakening in employment, set the desk for additional charge reduction down the road,” Porter wrote. “Nonetheless, we suspect the Financial institution will proceed to take it one step at a time, restrained by the three% y/y traits in some core measures, in addition to the chance that headline inflation will pop, eventually [sic] quickly, in subsequent month’s report.”
Whereas most economists count on a 25-basis-point minimize tomorrow, CIBC’s Andrew Grantham goes additional, forecasting one other minimize on the October assembly. He pointed to mounting financial slack and the potential for weaker costs following the lifting of retaliatory tariffs earlier this month, including that core inflation ought to proceed to chill within the months forward.
Bond markets took the info largely in stride. 5-year Authorities of Canada yields briefly spiked to 2.7% after the discharge earlier than easing again to 2.67%, little modified from the open.
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Final modified: September 16, 2025
