Canada saw a rise in its annual inflation rate to 3.1% in September, as reported by Statistics Canada. This increase has put the Bank of Canada in a challenging position as it prepares for its upcoming rate announcement. The consumer price index inched up by 0.1% last month compared to August, influenced by heightened benchmark oil prices due to the Middle East conflict. However, the shift to lower-cost winter gasoline blends provided some relief in September, despite a significant 27.8% year-over-year surge in pump prices.
CIBC’s chief economist, Avery Shenfeld, noted that while gasoline prices have driven inflation, other sectors have not experienced significant price increases. When excluding gasoline, consumer prices rose by 2.2% year-over-year in September. Data from Kalibrate revealed that the average price for a liter of regular gasoline in Canada stood at $1.824, marking a nearly 33% increase from a year earlier. Diesel prices also surged by almost 80% over the past year.
Statistics Canada mentioned that grocery prices increased by 1.7% year over year in September, a decrease from the 2.8% rise in August. This slowdown in food inflation was attributed to lower prices for fresh vegetables and a decline in the “sugar and confectionary” category. Shelter prices rose by 1.8% year-over-year, up from 1.5% in August. Core inflation measures from Statistics Canada eased slightly on a monthly basis in September, which are closely monitored by the Bank of Canada.
Economists highlighted the dilemma the Bank of Canada faces, where a rate hike to address persistent energy-related inflation could impact other parts of the economy like the job market. Bank of Canada Governor Tiff Macklem cautioned about high global energy prices leading to increased inflation expectations. The Bank of Canada’s latest Business Outlook Survey projected an average inflation of 3.7% over the next year.
Overall, the Bank of Canada is expected to closely monitor the inflation situation and may consider adjusting interest rates as needed to manage inflation while supporting economic stability.
