Canada’s annual inflation rate ticked up to 3.1% in September, driven higher by climbing gasoline and fuel oil prices, according to data released by Statistics Canada. The acceleration from August’s 3.0% reading comes as markets and economists weigh potential monetary policy moves ahead of the central bank’s upcoming decision.
Energy Costs Drive the September Acceleration
Energy prices climbed 19.0% year-over-year in September, accelerating from a 15.4% gain in August, Statistics Canada reported. Gasoline prices rose 27.8% compared to a year earlier, up from 22.8% the previous month. Meanwhile, fuel oil and other fuels jumped 57.8%, placing the heaviest financial burden on Atlantic Canada, where home heating with oil is more common. Transportation costs overall rose 8.4%.
Shelter costs also edged upward to a 1.8% annual increase, led by a 4.9% rise in home and mortgage insurance. Rent increased 2.8%, matching the rate recorded in August, while mortgage interest costs slipped 0.2%.
Sherry Cooper of Dominion Lending Centres Group says underlying inflation trends remain consistent with a wait-and-see approach, while Stéfane Marion of National Bank of Canada expects the Bank of Canada to refrain from hiking rates next week.https://t.co/7HWcvP53Lr
Grocery Price Growth Moderates Despite High Historical Levels
While energy expenses climbed, grocery price growth slowed for the second consecutive month. Food purchased from stores rose 1.7% year-over-year in September, marking the smallest annual increase since May 2024. Declines in fresh vegetables, down 2.9%, and sugar and confectionery, down 2.7%, contributed to the moderation. Despite the recent slowdown, grocery prices remain up 33% since September 2020, according to data cited by Oilprice.com.
Markets Weigh Bank of Canada Rate Decision
The latest inflation print arrives just ahead of the Bank of Canada rate-setting meeting on October 28, where the policy rate sits at 2.25%. Reuters reported that financial markets were pricing in nearly a quarter-point hike by year-end even before the September figures were published. Governor Tiff Macklem noted over the weekend that sustained high global energy prices could push up expected inflation.
Economists remain divided on the timing of potential monetary tightening. Douglas Porter, chief economist at BMO Capital Markets in Toronto, said that he views a rate hike in 2026 as a long shot given a struggling economy and core inflation moving closer to the 2% target, pointing instead to early 2027. Conversely, CIBC World Markets Inc. highlighted that rising Industrial Product Price Index costs—up 13.5% in August—could portend further input pressures prompting central bank action, Investment Executive reported.
Regional Inflation Rates Vary Across Canada
How did regional inflation rates vary across Canada in September?
Prices rose at a faster pace in five provinces in September compared to August. Excluding energy, Nova Scotia posted the fastest price growth in Atlantic Canada at 3.3%, followed by Prince Edward Island at 2.6%, New Brunswick at 2.6%, and Newfoundland and Labrador at 2.4%, all outpacing the national level of 2.1%.
What specific items drove the slowdown in grocery inflation?
The year-over-year slowdown in grocery prices was driven by decreases in fresh vegetables, which fell 2.9%, and sugar and confectionery products, which dropped 2.7%.
What is the current status of tuition fee adjustments?
Tuition fees, which are priced annually in September, increased by 2.4% in 2026, compared to a 1.7% increase in 2025. Students in Prince Edward Island experienced the largest increase at 4.9%, while students in Newfoundland and Labrador saw the smallest increase at 0.6% due to a tuition fee freeze.
Next Scheduled Policy Announcement
The Bank of Canada is scheduled to announce its next interest rate decision on October 28.
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