Canada inflation holds at 3% in August as oil prices remain elevated and food inflation eases

Canada’s annual inflation rate held steady at 3% in August, unchanged from the previous month, as persistently high crude oil prices kept gasoline costs elevated while food price inflation eased slightly, data showed on Monday.

Next month’s Consumer Price Index data could show a further increase after benchmark Brent crude climbed above $100 a barrel this month, while the impact of US President Donald Trump’s new 50% tariffs and Canada’s retaliatory measures feeds through to costs for a full month.

Analysts polled by Reuters had expected the annual inflation rate to remain unchanged at 3%, with no change in prices on a monthly basis.

On a monthly basis, consumer prices fell 0.1%, according to Statistics Canada.

Gasoline prices declined slightly in August but remained 22.8% higher year-on-year, compared with a 25.7% increase in July.

Food inflation eases for first time in more than a year

Food price inflation, which had been accelerating at a faster pace than headline inflation since July, eased slightly to an annual rate of 2.8%. This marked the first time in 14 months that food inflation had fallen below 3%.

Dairy products led the slowdown in food inflation, with prices rising 0.7% year-on-year in August, compared with a 3.1% increase in July. Statistics Canada said cheese and yogurt prices were the main contributors to the slower increase in dairy costs.

Prices for travel tours rose 26.1%, making them another major contributor to inflation after gasoline and food, largely due to a base effect. During the same period last year, costs in the category fell amid a sharp decline in travel by Canadians to the United States.

The CPI-median measure, which tracks the price change at the midpoint of the CPI basket, stood at 2%, while CPI-trim, which excludes the most extreme price movements, came in at 1.9% in August, unchanged from July.

These measures of underlying inflation have remained broadly around 2% in recent months, helping ease concerns that higher crude oil prices are spilling over into other costs.

Shelter costs, which include rents and mortgage interest, edged up to 1.5% in August from 1.3% in July.

Bank of Canada monitors inflation risks

The Bank of Canada said last month that it would not hesitate to raise interest rates several times if inflation remained elevated and began affecting closely watched measures of underlying inflation.

The central bank aims to keep inflation near the midpoint of its 1% to 3% target range.

Following the inflation data, the Canadian dollar extended its losses, falling 0.29% to C$1.3909 per US dollar, equivalent to 71.90 US cents.

Bond yields also rose, with the yield on Canada’s two-year government bond climbing 1.4 basis points to 2.703%.

The data suggest that price pressures remain largely concentrated in energy and some related categories, while underlying inflation measures have stayed close to 2%, limiting concerns that higher oil prices are spreading more broadly across the economy.