Canada’s annual inflation rate remained steady at three percent in August, according to Statistics Canada. The report highlighted a slight decrease in gasoline and food prices, offset by an increase in prices for tours and travel. Housing costs, including rents and mortgage payments, also saw a slight uptick during the same period.
In August, consumer prices experienced a 0.1 percent decline on a monthly basis. Economists surveyed by Reuters had anticipated that the annual inflation rate would stay at three percent. The latest consumer price index data does not reflect the recent surge in crude oil prices due to escalating tensions in the Middle East. Gasoline prices have surged by approximately 21 percent year-over-year nationwide as of last Friday, according to data from Kalibrate.
Economist Benjamin Reitzes from the Bank of Montreal predicts that rising gas prices will likely contribute to higher inflation in September. On the other hand, RBC economist Abbey Xu noted that there is currently limited evidence to suggest that increased energy costs are spurring price hikes in other sectors of the economy. She highlighted that while prices for energy-intensive categories like air travel remain elevated, the broader consumer basket has not seen significant price increases.
Reitzes pointed out that the unexpected 0.2 percent decline in food prices in August, driven by lower prices of fresh fruits and vegetables, may be short-lived due to the expected rise in fuel costs. Both Reitzes and Xu agreed that the latest data from Statistics Canada supports their view that the Bank of Canada will maintain its current interest rates in the near term.
Despite the ongoing economic indicators, Reitzes emphasized that the Bank of Canada is unlikely to raise interest rates soon, especially in light of the continued surge in oil prices. This situation may dampen market speculation regarding a potential rate hike in October.