September Inflation Overview
Statistics Canada reported that overall consumer price growth was driven by a 27.8% year‑over‑year increase in gasoline prices last month, even though the switch to the less expensive winter gas blend was in place. Excluding gasoline, consumer prices rose 2.2% compared with September 2023.
Energy Prices
Fuel oil and other fuels surged 57.8% in September, placing particular pressure on households in Atlantic Canada where many homes rely on oil for heating. Bank of Canada Governor Tiff Macklem warned during a media roundtable in Thailand that persistently high energy prices are increasing the risk of broader inflation and that the central bank is prepared to raise rates if necessary.
Food Prices
Grocery prices increased 1.7% year‑over‑year in September, the smallest yearly increase since May 2024. The slowdown was mainly due to a 2.9% drop in fresh vegetable prices and a 2.7% decline in sugar and confectionery items. Beef prices rose 8.7% compared with September 2023, a slower pace than the 11% increase recorded in August. Despite the recent moderation, grocery prices remain 33% higher than they were in September 2020.
Shelter and Housing Costs
Shelter prices rose 1.8% in September, up from 1.5% in August. The increase was supported by a 4.9% rise in mortgage insurance premiums and a 1.2% gain in home maintenance and repair costs.
Monetary Policy Outlook
Economists had broadly expected inflation to accelerate to 3.2% in September, up from 3.0% in August. Andrew Grantham, senior economist with CIBC Capital Markets, noted that the “hawkish tone” of Governor Macklem’s weekend comments had raised market expectations of an interest rate hike later in the month. However, Grantham added that the inflation report “suggests that there is little rush and policymakers can take more time to assess how U.S. trade relations and the impact of new tariffs develop before raising rates.”
Governor Macklem also observed that, while the global economy has been performing better than expected despite ongoing wars in Iran and Ukraine, sweeping trade disruptions, and higher borrowing costs from rising bond yields, resilience is increasingly “under strain” as shocks such as the Middle East conflict persist and drive up energy prices.
The September inflation report represents the Bank of Canada’s final look at price data before its next interest rate decision on October 28.
