Wed. Sep 20th, 2023
    The Latest on Inflation in Canada: August Inflation Rate Rises to 4%, Well Above Target

    The annual inflation rate in Canada has continued to accelerate for the second consecutive month, with both headline and core inflation measures rising significantly. According to Statistics Canada, the Consumer Price Index (CPI) rose by 4% in August compared to the previous year, driven by increasing gasoline and shelter prices. This rate is the highest since April when inflation was at 4.4%. It is well above the Bank of Canada’s target of 2%.

    Gasoline prices experienced a 0.8% year-on-year increase in August, which is a notable change from the 12.9% drop in prices witnessed in the 12 months leading up to July. This increase in gasoline prices was the main driver behind the surge in inflation.

    The Bank of Canada focuses on two measures of core inflation, which exclude volatile price movements. These measures increased to 4.1% and 3.9%, up from 3.9% and 3.6% respectively. The central bank places more weight on these measures when assessing inflation trends.

    The recent rise in global oil prices, along with less favorable year-over-year energy-price comparisons, has contributed to the reversal of the previous decrease in inflation. The price of benchmark West Texas Intermediate Crude rose from US$70 per barrel in June to US$80 in August, and has continued to increase.

    In addition to gasoline prices, shelter inflation also rose in August. Rent increased by 6% compared to the previous year, while mortgage interest costs rose by 30.9%. On the other hand, there was some relief on food prices, with grocery prices increasing by 6.9% in August, compared to 8.5% in July.

    The Bank of Canada is closely monitoring inflation and has held its key interest rate steady at 5%. However, if inflation remains stubborn, the bank has signaled that it may resume rate hikes in order to bring annual CPI inflation back down to 2%.

    In conclusion, the latest inflation report in Canada reveals an upward trend in inflation, with the August rate reaching 4%. This increase is driven by higher gasoline and shelter prices, as well as the rise in global oil prices. The Bank of Canada is closely watching core inflation measures and may consider further rate hikes if inflation persists above target.

    – Statistics Canada
    – Bank of Canada