The Consumer Price Index (CPI) rose 3.0% year over year in August, matching the 3.0% increase in July, reported Statistics Canada on Monday.
Year over year, prices for gasoline rose at a slower pace in August compared with July, putting downward pressure on the all-items CPI. Excluding gasoline, the CPI rose 2.4% in August, after increasing 2.2% in July. In August, the slowdown in gasoline prices on an annual basis was offset by higher prices for travel tours and rent, said the federal agency.
The CPI fell 0.1% month over month in August. On a seasonally adjusted monthly basis, the CPI rose 0.2%, it added.
“Year over year, prices for travel tours rose at a faster pace in August (+26.1%) compared with July (+15.2%), partly due to a base-year effect. Canadian travel to the United States declined sharply in 2025, putting downward pressure on prices for airfares and travel tours. Given that this decline has now stopped affecting the 12-month price movement, along with the introduction of fuel surcharges amid higher prices for jet fuel, upward pressure has been put on the travel tours index. On a monthly basis, prices for travel tours fell 2.9% in August,” said Statistics Canada.
“Prices for gasoline rose 22.8% year over year in August, following a 25.7% increase in July. Despite the year-over-year slowdown, prices for gasoline remained elevated, as the conflict in the Middle East continued in August.
“On a year-over-year basis, consumers paid less for clothing in August (-1.1%) compared with July (+0.9%). The decline was driven by lower prices for men’s clothing (-2.3%) and children’s clothing (-1.9%), following increases of 2.0% for men’s clothing and 4.0% for children’s clothing in July. Conversely, women’s clothing was unchanged (+0.0%) year over year in August, after falling 0.7% in July, moderating the decline in clothing prices.”
StatsCan said price growth for food purchased from stores continued to slow in August, rising 2.8% year over year after increasing 3.1% in July. For the first time since July 2024, grocery price growth increased at a slower pace than the all-items CPI in August 2026.
“Prices for dairy products led the deceleration in grocery prices; they rose 0.7% year over year in August compared with a 3.1% rise in July. Cheese and yogurt were the top contributors to the slowdown in dairy prices,” it noted.
“Smaller price increases for fresh or frozen pork (+1.6%), condiments, spices and vinegars (+0.7%) and fresh fruit (+4.7%) also contributed to the year-over-year slowdown in grocery inflation in August.
“Although prices for groceries decelerated this month, prices have increased 29.0% since August 2021.”
Headline inflation remained elevated in August, but core measures continued to show limited evidence that high energy prices are spilling over into wider inflationary pressure, said Andrew Grantham, Senior Economist, CIBC Capital Markets.
“The next Bank of Canada meeting is more than a month away and there is another CPI report to be released between now and that time, as well as monthly GDP and employment. We continue to expect the Bank will remain on hold at that time despite a possible energy-driven re-acceleration in headline inflation, due to the downside risks to growth emanating from US trade policy and with core measures of inflation giving policymakers comfort that higher energy prices are not translating into widespread inflationary concerns.”
Inflation held at the top of the Bank of Canada’s 1-3% control range in August. But also, as expected, the Bank of Canada’s (BoC) core inflation measures started to drift a bit above 2% in August as higher energy costs start to drive price increases in other areas of the economy, said Leslie Preston, Managing Director & Senior Economist, TD.
“Prior to today’s inflation reading, the 2-Year Government of Canada bond yield had risen over 40 basis points over the past month as markets moved to price in interest rate hikes from the Bank of Canada this year. We don’t think today’s inflation report supports this degree of tightening. Yes, core inflation is likely to move up in the coming months, but off a very low level, and is expected to remain with the BoC’s comfort zone. That is driven by our expectations for modest growth in Canada, as the economy continues to be weighed down by the uncertainty and tariffs on our exports to the U.S.”
Benjamin Reitzes, Managing Director, Cdn Rates & Macro Strategist, said: “Nothing here to push the BoC closer to a rate hike, which should tame market speculation around a potential move in October. However, oil prices are a real problem here, up nearly 5% again today. That’s going to drive angst among policymakers and concern that it’s just a matter of time before we get some spillover into broader inflation.”
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