Canadian inflation holds at 3% as gasoline costs surge

Canada’s annual inflation rate remained unchanged at 3% in August, according to Statistics Canada, as the effects of higher energy costs continued to spread through household budgets. Gasoline prices were 22.8% higher than a year earlier, although that was a slower increase than the 25.7% recorded in July. Excluding gasoline, consumer prices increased by a more moderate 2.4%.

Grocery prices increased 2.8% year over year, rising more slowly than overall inflation for the first time in more than two years. Rent inflation accelerated to 2.8% from 2.5% in July, while travel costs increased as airlines and tour operators added fuel surcharges and adjusted to the sharp decline in Canadian travel to the United States. Those pressures may be particularly noticeable in Alberta and British Columbia, where long travel distances make households and businesses sensitive to fuel prices.

The report presents the Bank of Canada with a divided picture after it held its policy rate at 2.25% earlier this month. Inflation excluding gasoline remains closer to the central bank’s 2% target, suggesting the increase is not yet a uniformly broad resurgence in prices. However, persistent rent costs and the possibility that expensive fuel will raise transportation and production expenses give policymakers reason to remain cautious about reducing interest rates.