Statistics Canada (StatCan) released its Consumer Price Index report for September today. Headline inflation ticked higher on rising gasoline prices, but underlying price pressures cooled off. This is the last inflation report from StatsCan before the Bank of Canada’s (BoC) next interest rate decision at the end of October. The BoC will need to weigh elevated inflationary pressures against slower economic activity and ongoing risks from trade and geopolitical tensions.

Canada's annual inflation rate rose  to 3.1% in September from 3.0% in August, slightly below the 3.2% economists expected. On a monthly basis, consumer prices rose by 0.1% in September after falling by 0.1% in the previous month.
Gasoline did the heavy lifting. Gasoline prices rose by 27.8% from a year ago, up from 22.8% in August. Excluding gasoline, inflation was 2.2%. Meanwhile, grocery inflation cooled to 1.7%, its slowest pace since May 2024.
Core inflationary pressures eased in September. The BoC's preferred core measures of inflation, trim and median, slowed to 1.8% and 1.9%, respectively. This suggests energy costs are not spreading broadly through the economy.
The BoC  makes its next rate announcement on October 28, alongside new economic forecasts. Currently, a survey of economists by Bloomberg expects the central bank to hold its policy interest rate steady at 2.25%.
The BoC’s third quarter surveys show Canadians expect higher inflation. This could have the BoC considering an interest rate increase.

Energy is keeping headline inflation above the BoC's 2% target, but cooler core measures and a softer labour market give the BoC room to stay patient. A rate hold looks most likely, although the BoC's new forecasts, higher inflation expectations from Canadians and optimistic comments from the BoC Governor Tiff Macklem over the weekend leave the potential for an interest rate increase either now or later this year on the table.

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