The Consumer Price Index (CPI) rose 2.4% on a year-over-year basis in September, up from a 1.9% increase in August, reported Statistics Canada on Tuesday.
On a year-over-year basis, gasoline prices fell less in September (-4.1%) compared with August (-12.7%) due to a base-year effect, leading to an acceleration in headline inflation. Excluding gasoline, the CPI rose 2.6% in September, after increasing 2.4% in August, said the federal agency.
A slower year-over-year decline in prices for travel tours (-1.3%) and a larger increase in prices for food purchased from stores (+4.0%) also contributed to the upward pressure in the all-items CPI in September. The CPI rose 0.1% month over month in September. On a seasonally adjusted monthly basis, the CPI was up 0.4%, explained Statistics Canada.
“Prices for gasoline fell 4.1% year over year in September after a 12.7% decrease in August. The smaller year-over-year decline was largely due to a base-year effect. In September 2024, prices fell 7.1% month over month due, in part, to lower crude oil prices amid growing concerns of weaker economic growth, particularly in China and the United States. In September 2025, gasoline prices rose 1.9% on a monthly basis following refinery disruptions and maintenance in the United States and Canada, which put upward pressure on prices,” noted the report.
“On a year-over-year basis, prices for travel tours fell 1.3% in September following a 9.3% decline in August. Despite typically declining on a month-over-month basis in September, travel tour prices rose 4.6% in the month. This was a result of higher prices for destinations in Europe and some parts of the United States, as major events in destination cities put upward pressure on hotel prices.
Consumers paid 4.0% more year over year for food purchased from stores in September, following a 3.5% increase in August. Faster price growth was driven by increased prices for fresh vegetables (+1.9% in September, compared with -2.0% in August) and sugar and confectionery (+9.2% in September, compared with +5.8% in August).
“Year-over-year grocery price inflation has generally trended upward since its most recent low in April 2024 (+1.4%). Grocery items contributing to the general acceleration included fresh or frozen beef and coffee, both due, in part, to lower supply.”
Following a year-over-year increase of 1.7% in August, the clothing and footwear index rose 0.8% in September. This slower growth helped moderate the acceleration in the all-items CPI. The downward pressure was driven by slower growth in clothing prices, partially offset by a smaller decline in footwear prices. On a month-over-month basis, clothing prices fell 0.3% in September. This was the first month-over-month decline in September since 1998, added Statistics Canada.
Andrew Grantham, Senior Economist, CIBC Capital Markets, said headline CPI accelerated by more than anticipated in September, but core measures of inflation were just subdued enough to support a further 25bp cut from the Bank of Canada next week, particularly given evidence of a sluggish recovery in GDP and weak business sentiment.
Douglas Porter, Chief Economist, BMO Capital Markets, said: “We were all braced for a pop in headline to back above 2% on gasoline prices alone, but unfortunately food inflation got hungrier as well, with a few other elements of core also nudging into the picture. Suffice it to say this will make the Bank of Canada’s decision a bit more interesting next week than previously expected—markets had been all but baking in a rate cut after Governor Macklem’s dovish remarks and yesterday’s soft Business Outlook Survey. Absolutely full disclosure: We have been on the dovish side of the ledger, calling for the Bank to eventually cut the overnight rate to 2.0% (and possibly lower if trade gets uglier), but were not convinced that October would see another cut. Given today’s setback for core, we’ll stay there for now. The biggest counterpoint, as noted above, is that some key measures of core are still fully consistent with the Bank’s view that underlying inflation is around 2.5%.”
Andrew Hencic, Director & Senior Economist, TD, said: “Underlying inflation appears to have firmed up in the past two months, but it remains within the Bank of Canada’s target range. One hotter-than-expected month does not a new trend make, but it is worth monitoring whether the strength in price pressures is indicative of ongoing consumer resilience.
“The Bank of Canada should still have room to deliver another cut. The economic outlook is fraught with risks, and the elevated unemployment rate reflects an economy with ample slack – something yesterday’s Business Outlook Survey reinforced. Markets seem to agree, pricing the odds for an October cut at 69%, just a smidge lower than the 77% pre-release.”
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