Canada saw an increase in its annual inflation rate, reaching 3.1 percent in September, as reported by Statistics Canada on Monday. This development has put the Bank of Canada in a challenging position leading up to its upcoming rate announcement. The consumer price index rose by 0.1 percent compared to August, driven by escalating oil prices due to conflict in the Middle East. However, the shift to more affordable winter gasoline blends offered some relief in September, although pump prices surged by 27.8 percent year-over-year.
CIBC’s chief economist, Avery Shenfeld, highlighted the inflation in gasoline prices but noted a lack of significant inflation in other sectors. Excluding gasoline, consumer prices went up by 2.2 percent year-over-year in September. The average price for a liter of regular gasoline in Canada stood at $1.824, representing a nearly 33 percent increase from a year ago. Diesel prices also soared by almost 80 percent over the past year.
Grocery prices experienced a 1.7 percent rise year-over-year in September, a decrease from the 2.8 percent uptick in August. This slowdown was attributed to lower prices for fresh vegetables and a decline in the “sugar and confectionary” category. Shelter prices increased by 1.8 percent year-over-year, up from 1.5 percent in August.
The core inflation measures from Statistics Canada showed a slight easing on a monthly basis in September. Economists noted that the Bank of Canada would need to carefully balance its decisions, considering the impact of energy-linked inflation on the broader economy. Bank of Canada Governor Tiff Macklem had previously warned about the potential impact of persistently high global energy prices on inflation. The U.S. benchmark oil price climbed over 70 percent year-to-date, with West Texas Intermediate crude settling at $97.70 US per barrel on Monday.
Looking ahead, the Bank of Canada’s latest Business Outlook Survey projected an average inflation rate of 3.7 percent over the next year. Despite uncertainties in energy markets, policymakers are expected to closely monitor inflation trends and economic indicators before making any adjustments to interest rates.