CALGARY — Canadian inflation remained at 3% in August as higher gasoline, rent and travel costs continued to squeeze household budgets, according to new Statistics Canada data.The annual inflation rate matched economists’ expectations and was unchanged from July. On a monthly basis, the consumer price index declined 0.1%.Gasoline prices were 22.8% higher than a year earlier as conflict in the Middle East continued to put pressure on global energy markets. However, the annual increase slowed from 25.7% in July, helping prevent the headline inflation rate from climbing further.That slowdown was offset by sharper increases in travel tour prices and rent.Travel tour prices surged 26.1% annually in August, accelerating from a 15.2% increase in July. Statistics Canada attributed part of the jump to a base-year effect after weaker demand for travel to the US weighed on prices in August 2025.Rent increased 2.8% from a year earlier, up from a 2.5% annual gain in July.Grocery price inflation provided some relief, falling below the headline rate for the first time in approximately two years. Food purchased from stores cost 2.8% more than a year earlier, down from a 3.1% increase in July..Bank of Canada says 50% tariffs will have ‘fairly modest’ inflation impact.According to Bloomberg, the Bank of Canada’s preferred measures of underlying inflation showed little movement.Median inflation remained at 2%, while trimmed inflation held at 1.9%.The numbers suggest underlying price pressures remained relatively contained, but elevated energy costs are beginning to spread through more parts of the economy.The share of consumer price index components increasing by at least 3% rose to 37.3% in August from 34.8% in July.The three-month annualized average of the central bank’s core measures also climbed to 2.19% from 2.01%, while annual inflation excluding food and energy increased to 2.1% from 1.9%.“Underlying inflation remains contained, but Bank of Canada officials will increasingly be looking at the coming passthrough from high oil prices in determining the future path of monetary policy,” Desjardins Group economist Royce Mendes wrote in a note to clients.Bank of Canada Governor Tiff Macklem warned earlier this month that a prolonged Middle East conflict would increase the likelihood of higher energy costs spreading to other prices.Macklem said renewed trade tensions with the US also pose an inflation risk but identified elevated energy prices as the more immediate concern..Grocery prices still outpacing inflation — and it's been doing so for 18 months.Financial markets continued to anticipate another interest-rate increase.Overnight swap traders placed the probability of a Bank of Canada rate hike next month at roughly 75%, little changed following the inflation report.Canada’s two-year benchmark bond yield rose about three basis points to 3.384% Monday morning.The Canadian dollar weakened 0.3% against the US dollar and fell to its lowest intraday level since September 2.Expectations for higher Canadian borrowing costs have also been reinforced by hotter-than-expected US inflation figures, which increased market bets on a Federal Reserve rate hike this week.Some economists nevertheless argue that expectations for a Canadian rate increase are premature because economic growth appears to be slowing while core inflation remains near the central bank’s 2% target.“Yes, core inflation is likely to move up in the coming months, but off a very low level, and is expected to remain within the BOC’s comfort zone,” Toronto-Dominion Bank managing director and senior economist Leslie Preston wrote in a note to investors.Preston said modest Canadian economic growth is expected as uncertainty and US tariffs continue weighing on the country’s exports.
