The Consumer Price Index (CPI) rose 3.1% year over year in September, following a 3.0% increase in August. The acceleration was led by higher prices for gasoline in September (+27.8%) compared with August (+22.8%). Excluding gasoline, the CPI rose 2.2%, after increasing 2.4% in August, reported Statistics Canada on Monday.
Moderating the acceleration in the all-items CPI in September were smaller year-over-year price increases for travel tours and groceries compared with the previous month. The CPI increased 0.1% month over month in September. On a seasonally adjusted monthly basis, the CPI rose 0.4%, said the federal agency.
“Prices for energy accelerated in September, rising 19.0% year over year following a 15.4% gain in August. Crude oil prices increased in September, reaching their highest level since May amid ongoing uncertainty about the wars in the Middle East, resulting in higher prices for gasoline and fuel oil,” said Statistics Canada.
“Year over year, prices for gasoline rose at a faster pace in September (+27.8%) compared with August (+22.8%). Moderating the increase in gasoline prices in September was the switch to the less expensive winter blend.
“Similarly, prices for fuel oil and other fuels rose 57.8% year over year in September, following a 43.7% increase in August. The price increase in September had a greater impact on consumers in Atlantic Canada, where fuel oil is more widely used.”
The report said prices for food purchased from stores rose 1.7% year over year in September, after increasing 2.8% in August. Although price levels remain high, this was the smallest yearly increase since May 2024 (+1.5%), and the second consecutive month where grocery price growth increased at a slower pace than the all-items CPI.
“Driving the year-over-year slowdown in grocery prices in September 2026 were declines in prices for fresh vegetables (-2.9%) and sugar and confectionery (-2.7%). Prices for other food preparations (+1.8%) and fresh or frozen beef (+8.7%) rose at a slower pace in September than in August (+2.8% and +11.0%, respectively), also contributing to the slowdown,” said the report.
“Despite the year-over-year slowdown in prices for groceries, prices have increased 33.0% since September 2020.”
Andrew Grantham, Senior Economist, CIBC Capital Markets, said: “Canadian inflation accelerated further in September, albeit by slightly less than expected and driven solely by higher gasoline prices. Headline CPI prices rose 0.1% (0.4% after seasonal adjustment) to take the annual rate up to 3.1%, with both of those figures a tick below consensus expectations. Higher gasoline prices drove the acceleration, and excluding that area inflation actually decelerated modestly to 2.2%, from 2.4% in August. Excluding food and energy, prices rose by a seasonally adjusted 0.1% for an annual rate of 2.1%. CPI-trim and CPI-median both printed a tick below consensus forecasts at 1.9% and 1.8% year-over-year, while the proportion of the basket rising more than 3% y/y edged down slightly. Following the hawkish tone of Governor Macklem’s (of the Bank of Canada) comments over the weekend, markets had moved to price in a greater chance of a rate hike later this month, but today’s CPI data suggests that there is little rush and policymakers can take more time to assess how US trade relations and the impact of new tariffs develop before raising rates.”
Leslie Preston, Managing Director & Senior Economist, TD Economics, said: “No jump scares in Canada’s inflation in September, in contrast to higher inflation south of the border. The hottest inflationary categories remain those most directly related to the spike in oil prices this year: energy and airfares. Looking at the Bank of Canada’s preferred inflation metrics over the past six months, inflation is only two tenths above their 2% target (2.2%). Surprisingly the 2-Year yield is only off slightly since the release.
“Today’s number supports our view that the Bank of Canada can remain on hold this year. There is little evidence higher energy costs are bleeding through to broader price pressures, which remain mild. On top of that, the Canadian economy faces downside risks due to tariffs and the volatile trade relationship with the U.S., a relatively soft job market, and now higher bond yields. We expect the combination of these forces will lead the Bank to stay on the sidelines this year.”
Douglas Porter, Managing Director, Chief Economist, BMO Capital Markets, said: “Markets came into this important inflation reading leaning heavily towards a BoC hike, driven by Governor Macklem’s hawkish comments over the weekend—which fixated on the fact that energy prices just keep going and going. However, this mild result on the cores, by themselves, will provide no satisfaction for those hiking expectations, anchoring around 2% (or lower) and exhibiting zero evidence that the energy price spike is spreading. Even so, the Bank seems laser-focused on the persistence of headline inflation above 3%, and it seems headline will stick there for a while, given the ongoing strength in oil and products. The Bank’s quarterly Business Outlook Survey is due in a few hours and if it portrays an upbeat picture for growth and rising inflation expectations, a hike at the October rate decision will very much be on the table. And while today’s CPI result was milder than expected, recall that the Bank look forward, so one tame current inflation result won’t necessarily stay their hiking hand.”
More from Retail Insider:
