Canada Inflation Rate Edges Up to 3.1%, Core Measures Ease

Canada’s inflation rate ticked up to 3.1% in September as gasoline prices rose, while gauges of underlying price pressures eased.

Gasoline prices rose 27.8% on an annual basis last month compared with a slower pace of 22.8% in August, Statistics Canada reported on Monday.

Excluding food and energy, the inflation rate held at 2.1%. Meanwhile, the Bank of Canada's median and trim measures of core inflation edged down to 1.9% and 1.8% respectively.

The consumer price index increased 0.1% on a monthly basis.

Economists surveyed by Bloomberg expected the headline inflation rate to tick up to 3.2% in September from 3% in August, and for the Bank of Canada's preferred core measures to remain the same.

The smaller-than-expected increase in price growth, along with the slowdown in core measures of inflation, will likely give some relief to the Bank of Canada ahead of its interest rate decision next week.

The central bank has been increasingly concerned about the inflationary risks of the Iran war, but has also been mindful of the economic impact US tariffs continue to pose on Canada.

Governor Tiff Macklem has warned that waiting too long to raise interest rates may force the central bank to have to increase its policy rate faster and higher than it otherwise would have.

At the same time, recent labor force data has underscored some of the economic vulnerabilities Canada faces as the US trade war drags on. Employment fell in Canada by 41,200 since December 2025, the largest year-to-date loss since the 2009 financial crisis, excluding 2020 during the Covid-19 pandemic.

Traders in overnight swaps placed the odds of a rate hike this month at nearly 70% prior to the CPI release.

In addition to the slowdown in core measures, the share of CPI components rising at 3% or higher fell to 29.2% from 34.2% in August.

Grocery prices increased at a slower pace last month, rising 1.7% year-over-year after increasing 2.8% in August. This marks the smallest yearly increase since May 2024 and the seconds straight month where grocery price grow rose at a slower pace than overall inflation.

Shelter prices increased 1.8% on an annual basis, up from 1.5% in August. The increase was driven by higher fuel prices, as well as faster price growth for homeowners' home and mortgage insurance and maintenance and repairs.