Canada inflation rises to 3.1% in September; core measures ease ahead of Bank of Canada decision

Canada’s inflation rate ticked up in September, but the underlying measures watched most closely by the Bank of Canada moved the other way, underscoring a split picture just days before the central bank’s next interest rate decision.

Statistics Canada said Monday that the Consumer Price Index rose 3.1% in September from a year earlier, following a 3.0% increase in August. On a seasonally adjusted monthly basis, CPI rose 0.4% in September; on an unadjusted month-to-month basis, it increased 0.1%. The acceleration in the annual rate was driven mainly by gasoline and other energy prices. Gasoline climbed 27.8% from a year earlier and 6.1% from August on an unadjusted basis, while the broader energy index rose 19.0% year over year after a 15.4% increase in August. Statistics Canada linked that pickup to higher crude prices and geopolitical uncertainty.

Outside gasoline, price pressures were notably softer. Excluding gasoline, CPI rose 2.2% in September from a year earlier, down from 2.4% in August, suggesting the headline increase was not broad-based. Grocery inflation also cooled sharply: food purchased from stores rose 1.7% year over year, down from 2.8% in August and marking the smallest increase since May 2024, Statistics Canada said. Shelter costs rose 1.8% from a year earlier, up from 1.5% in August, while rent increased 2.8%, unchanged from the previous month.

The Bank of Canada’s three preferred core inflation measures — gauges meant to strip out volatile swings and better reflect underlying price trends — all eased in September. CPI-trim slowed to 1.8% from 1.9%, CPI-median fell to 1.9% from 2.0%, and CPI-common decelerated to 2.4% from 2.6%.

That makes Monday’s report especially significant for policymakers and borrowers alike. It is the last monthly inflation reading before the Bank of Canada’s scheduled policy announcement on Oct. 28. The central bank targets 2% inflation over time and uses both headline CPI and its core measures to judge whether price growth is becoming more entrenched. At its last decision on Sept. 2, the Bank of Canada held its policy rate at 2.25%, saying, “The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%."

Statistics Canada said the main contributors pushing prices higher outside energy included rent, air transportation, food purchased from restaurants, and property taxes and other special charges.

Still, the broad message from September’s report was mixed. Headline inflation moved further above the Bank of Canada’s 2% target, lifted by a sharp jump in gasoline and energy costs. But core inflation measures softened, and overall price growth excluding gasoline slowed, pointing to easing underlying inflation pressures ahead of the central bank’s Oct. 28 decision.