| Consensus | Consensus Range | Actual | Previous | |
| CPI - M/M | 0.0% | 0.0% to 0.3% | -0.1% | 0.5% |
| CPI - Y/Y | 3.0% | 3.0% to 3.1% | 3.0% | 3.0% |
| Core CPI - M/M | 0.0% | 0.4% | ||
| Core CPI - Y/Y | 2.0% | 1.9% to 2.3% | 2.1% | 1.9% |
Highlights
Governor Tiff Macklem said earlier this month that at 3.0 percent, inflation was"too high", and with inflation still at 3.0 percent in August, as expected, today's report does nothing to change that assessment.
On a monthly basis, prices edged down 0.1 percent, while forecasters in an Econoday survey had expected a flat reading.
The Bank of Canada had projected the 12-month inflation rate to average 2.5 percent in the third quarter, and with only one more data point left for the quarter, the average is currently 3.0 percent, far above the central bank's projection.
Excluding gasoline, consumer prices rose 2.4 percent year-over-year in August after a steady rate of increase of 2.2 percent the previous three months. Gasoline prices contracted 0.9 percent on the month, for a 12-month increase of 22.8 percent, the largest upward contributor to the year-over-year CPI increase.
Consumer prices excluding food and energy were flat on the month and up 2.1 percent year-over-year, an increase from 1.9 percent in July.
Still, the central bank's own measures of core inflation showed no uptick, with the CPI-tim at 1.9 percent and CPI-median at 2.0 percent, both unchanged from July, averaging 2.0 percent each month. This is in line with the BoC's third quarter projection and with the 2.0 percent policy target.
But this steady reading might not be enough to appease the central bank given the recent spike in oil prices that can only worsen the inflation picture for September. Already, the BoC said at its last meeting that"the ongoing conflict in the Middle East is keeping energy prices higher for longer, and this has increased the upside risks to the outlook for inflation.” Since then, hostilities have intensified.
Meanwhile, other major central banks' moves also matter. Expectations of a rate hike by the Federal Reserve this week have firmed and the European Central Bank raised its key policy rate by 25 basis points to 2.50 percent last week, a decision ECB President Christine Lagarde called a"no brainer".
In August, food prices were down 0.2 percent on the month and up 2.8 percent year-over-year, and energy also declined 0.2 percent while still up 15.4 percent from a year earlier.
Overall, goods prices declined 0.3 percent from July and rose 3.4 percent from August 2025. Services prices were up 0.2 percent and 2.8 percent, respectively.
Of the eight major categories, only three recorded higher monthly prices in August: shelter and household operations, furnishings and equipment, both rising 0.3 percent, and recreation, education and reading, up 0.1 percent.
On a 12-month basis, all major categories posted higher prices.
The largest upward contributors to the 12-month CPI increase were gasoline, travel tours (26.1 percent), and rents (2.8 percent).
On a seasonally-adjusted basis, the CPI increased at a steady pace of 0.2 percent in August from July. Excluding food and energy, the index was up 0.3 percent, the same as in July.
Market Consensus Before Announcement
Energy prices continue to underpin CPI with the overall number expected to hold at 3.0 percent on year in August and core seen steady at 1.9 percent too.
Definition
The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI provide widely used measures of inflation. The policy target measure for the Bank of Canada (BoC), the annual CPI rate can be distorted by swings in the more volatile subsectors so the central bank also monitors an adjusted measure of the CPI that excludes a range of volatile categories in order to get a better handle on underlying trends.
Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as Canada, where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
As the most important indicator of inflation the CPI is closely followed by the Bank of Canada. The Bank of Canada has an inflation target range of 1 percent to 3 percent but focuses on the 2 percent midpoint. It uses the CPI and three measures of the underlying rate as the prime inflation indicators. Markets also look at core rate which excludes food and energy.