Canada’s inflation rate saw a significant uptick last month. It is reaching an annual rate of four percent, primarily driven by a surge in gasoline prices. Statistics Canada’s latest report reveals that inflation increased by 0.7 percentage points. It is mainly due to the first annual rise in gasoline prices since January.
Gasoline prices soared by 4.6 percent in August alone, with a year-over-year increase of 0.8 percent. Beyond fuel, other essential expenses such as food and housing costs continued their upward trajectory. The cost of shelter, including housing, surged by six percent in the year leading up to August, up from 5.1 percent in July. Notably, rent played a significant role in this increase, with average rents rising by 6.5 percent nationwide.
Homeownership didn’t become any more affordable either, as mortgage interest costs climbed by another 2.7 percent during the month. It is marking a staggering 30.9 percent increase over the year to August. This figure surpassed July’s already high level of 30.6 percent. Canada’s inflation rate rise to 4% this year.
Despite these concerning trends, there was a surprising relief found in the grocery aisle. The price of food purchased from stores increased by 6.9 percent over the past year. Still nearly double the overall inflation rate but a notable decrease from recent highs, which exceeded 11 percent. In August specifically, food prices even declined by 0.4 percent compared to July.
Doug Porter, an economist at the Bank of Montreal, noted that while the overall increase in the inflation rate wasn’t entirely unexpected. It poses challenges for the Bank of Canada. The central bank had recently halted its aggressive campaign of interest rate hikes, which aimed to reach five percent.
Porter commented, “Things just got a lot more interesting for the Bank of Canada, and most definitely not in a good way.” Market indicators, such as swaps trading, now suggest a 50 percent chance of a rate hike when the central bank convenes at the end of October.
The latest inflation figures highlight the ongoing economic challenges facing Canadians, particularly in the realms of housing and transportation costs. As policymakers grapple with these issues, they must strike a delicate balance between controlling inflation and ensuring the well-being of citizens in a rapidly changing economic landscape.