Canada Inflation Holds at 3% as Travel Costs Surge

Travel tours became the surprise pressure point in Canada’s August inflation report, jumping 26.1% from a year earlier as the fading impact of last year’s weak U.S.-bound travel pushed the annual comparison higher.

Statistics Canada said Monday that consumer prices rose 3.0% in August from a year earlier, matching July’s increase. The result leaves inflation above the Bank of Canada’s 2% target midpoint and at the top of its 1% to 3% control range, though the underlying picture was less heated than the headline number suggests.

Gasoline prices still rose 22.8% annually, but that was slower than July’s 25.7% gain and therefore acted as a drag on the monthly inflation rate. Excluding gasoline, consumer prices climbed 2.4%, up from 2.2% in July. Rent and travel costs offset the softer energy contribution.

The monthly CPI fell 0.1% in August on an unadjusted basis, while the seasonally adjusted index rose 0.2%. Travel tours actually declined 2.9% from July, underscoring how much the annual reading reflects base effects rather than a fresh burst of demand.

Food offered a more reassuring signal. Grocery prices increased 2.8% year over year, marking the first time since July 2024 that food purchased from stores rose more slowly than the overall CPI. Shelter prices increased 1.5%, according to Statistics Canada.

The Bank of Canada’s preferred core measures remained close to target. CPI-trim held at 1.9% and CPI-median at 2.0%, leaving their average at roughly 2%. A separate measure excluding food and energy edged up to 2.1%, according to RBC Economics.

That mix gives policymakers little reason to rush in either direction. The central bank held its overnight-rate target at 2.25% on September 2, while warning that elevated energy costs and fresh U.S. tariffs remained risks to the outlook. August’s data showed those shocks have lifted the headline rate, but have not yet spread broadly through the consumer basket.

For the Canadian dollar, the report is mildly supportive because it reduces the case for near-term easing, although stable core inflation limits the odds of a renewed tightening campaign. The next major test will be whether energy and travel effects persist into September, or fade as their statistical base effects roll through.