Canada experienced a rise in its annual inflation rate to 2.4% in September, with an increase in 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% figure, but excluding gas, the inflation rate surged to 2.6%.
Consumers faced a four percent hike in grocery expenses in September compared to the previous year, primarily fueled by higher prices for fresh vegetables and sugary products. Statistics Canada highlighted a consistent upward trend in grocery inflation since April 2024, with fresh and frozen beef and coffee contributing to the spike due to limited supply.
Rental costs also played a significant role in driving inflation, rising by 4.8% year-over-year, with shelter expenses being the largest component of the inflation basket. In contrast, gas prices saw a milder decline of 4.1% compared to the same period last year, influenced by refinery disruptions in the U.S. and Canada.
Furthermore, travel tour expenses decreased at a slower pace in September compared to the previous year, with a 4.6% increase from August due to elevated hotel prices during major events in the U.S. and Europe. The September inflation report sets the stage for the upcoming Bank of Canada’s interest rate meeting on Oct. 29.
Despite inflation hovering within the Bank of Canada’s target range of one to three percent, it now exceeds the midpoint of that range. Analysts suggest that forward-looking indicators point towards a potential slowdown in inflation rather than a further increase. However, core inflation measures, excluding volatile sectors like gas, continue to surpass the central bank’s target range, leading to speculation about a potential rate cut.
While markets had anticipated a rate cut, economists are divided on the central bank’s next move, with some leaning towards a rate reduction following concerns expressed by Bank of Canada governor Tiff Macklem regarding the soft job market.
