Energy drives the headline higher
Statistics Canada reported Monday that the consumer price index climbed 3.1 per cent on an annual basis in September, edging up from three per cent in each of the two previous months. The reading landed just under the 3.2 per cent consensus estimate. Energy prices stood 19 per cent above their year-earlier level, compared with 15.4 per cent growth in August, and gasoline alone rose 27.8 per cent, adding 1.1 percentage points to the headline figure.[S2][S3]
One analysis attributed the acceleration squarely to crude costs pushed up by conflict in the Middle East, noting that inflation would have run at a more moderate 2.1 per cent without energy. Furnace oil and gasoline climbed from August levels, while food price growth continued to ease. On a seasonally adjusted basis, the index advanced 0.4 per cent month over month.[S1][S2]
Groceries slow, shelter stays modest
Grocery store prices increased 1.7 per cent year over year, down from 2.8 per cent in August and the smallest annual gain since May 2024. It was the second straight month in which grocery inflation ran below the overall rate. Fresh vegetables and sugar and confectionery items became cheaper, while beef and other food preparations rose more slowly. Restaurant prices were little changed at 3.1 per cent, and overall food inflation eased to 2.2 per cent from 2.8 per cent.[S2][S3]
Shelter costs rose 1.8 per cent from a year earlier. Even with slower grocery increases, one analysis argued households felt scant relief because gasoline approached $2 a litre, and it noted that grocery prices have accumulated a 33 per cent climb since September 2020 — a slowdown in the rate of increase rather than a decline in prices.[S1][S3]
Core measures ease as economists split
The Bank of Canada's preferred core gauges moved lower: CPI-median slipped to 1.9 per cent from two per cent, and CPI-trim fell to 1.8 per cent from 1.9 per cent. The average of the two stood at 1.9 per cent, and CPI excluding food and energy held at 2.1 per cent. One analysis described the breadth of price pressures as widening somewhat, with pass-through most visible in oil-sensitive transportation categories such as airfares, while local transit price growth stayed comparatively subdued.[S1][S2][S3]
Robert Kavcic of BMO Capital Markets said the report came in a touch softer than expected and that while 3.1 per cent is still fairly hot, core measures show few signs of near-term acceleration. Leslie Preston of TD Bank Group said she was pleasantly surprised by the softer headline and that stripping out energy suggests Canadians are not facing very high inflation, though she expects core pressures to build as businesses pass on costs.[S3]
A central bank watching for spillovers
The release is the final inflation snapshot before the Bank of Canada announces its overnight rate later this month. One forecast expected the central bank to keep its policy rate at 2.25 per cent, citing a reading slightly below expectations and a weak labour market in which businesses began layoffs while freezing hiring. That analysis projected a hold through 2026 with a first hike in January 2027.[S1]
Another outlook also assumed no change through the rest of 2026 followed by gradual increases in 2027, pointing to softer employment data and higher fixed borrowing costs as room for patience. It cautioned that recent communication from the central bank and Governor Tiff Macklem signals more urgency than the data so far imply, raising the risk of a preemptive move. Employment fell in both August and September, and unemployment held around 6.5 per cent.[S2]
Macklem, addressing journalists on Saturday following an International Monetary Fund gathering in Bangkok, said the likelihood that inflation widens and proves more stubborn has increased, pointing to the continuing conflict, reduced shipments and harm to refinery capacity. He reaffirmed the central bank's commitment to its two per cent goal and said it stands ready to modify policy if necessary. One analysis cautioned that sustained elevated oil prices could ultimately pass through transport expenses into every good and service.[S2][S3][S1]
