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Special Report

Canada Inflation Research Brief

September 2023

Interest Rate Uncertainty Continues to Loom as
Inflation Edges up for Second Straight Month

Further price growth raises risk of additional rate hike. Canada’s annual inflation rate jumped to 4.0 per cent in August. This was up from 3.3 per cent seen in July and above the consensus estimate of 3.8 per cent. Higher gasoline prices and unfavourable base-year effects for energy prices were largely to blame for the overall acceleration. However, with both of the Bank of Canada’s preferred measures of core inflation — CPI-trim and CPI-median — increasing 0.4 per cent monthly, the three-month annualized rate hit its highest level in over a year at 4.5 per cent. Underlying price pressures remained sticky, which provides further risk toward an additional interest rate hike. With headline and core inflation now sitting at or above 4.0 per cent, mortgage interest costs can no longer be blamed for keeping inflation elevated, as this component added a little more than a 1.0 percentage point to the headline rate. 

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