Canada’s annual inflation rate increased to 2.4 percent in September, driven by higher grocery prices and a slower decline in gas and travel tour costs, according to Statistics Canada’s latest report. Economists had anticipated a 2.2 percent inflation rate, but excluding gas, the rate reached 2.6 percent.
Shoppers faced a four percent hike in grocery prices compared to the previous year, mainly due to increased prices for fresh vegetables and sugary items. The inflation in the grocery sector has been on the rise since April 2024, with items like fresh and frozen beef and coffee contributing to the increase.
Nathan Janzen, RBC’s assistant chief economist, noted that food prices in Canada have been volatile, with persistent growth, partly attributed to low supply of certain items. Additionally, rental prices played a significant role in driving inflation up to 4.8 percent year-over-year, with shelter costs being a key component.
In contrast, gas prices decreased by 4.1 percent year-over-year in September, a slower rate compared to the previous year, influenced by refinery disruptions in the US and Canada. Travel tour costs also declined at a slower pace, rising by 4.6 percent from August, primarily due to heightened hotel prices during major events in the US and Europe.
The latest inflation data precedes the Bank of Canada’s upcoming interest rate meeting, with inflation hovering above the midpoint of the target range of one to three percent. While the central bank usually focuses on core inflation measures, which exclude volatile sectors like gas, some indicators are still above three percent, surpassing the bank’s target range.
Market analysts are divided on whether the Bank of Canada will implement a rate cut, with differing opinions based on inflation trends and recent economic reports. Despite some optimism stemming from a stronger-than-expected jobs report, there are still concerns about the soft job market, hinting at a potential rate adjustment in the future.