Canadian Inflation Rate Eases Again in September

The annual Canadian inflation rate fell to its lowest in more than three years in September, led by a decline in gasoline prices. 

Statistics Canada’s consumer price index on Tuesday showed the overall inflation rate up 1.6% on a year-over-year basis in September, down from a 2% gain in August and a slower increase than expected by economists and analysts. It marks the smallest yearly increase in the inflation rate since February 2021 when it came in at 1.1%. 

The September inflation rate sets the stage for another potential interest rate cut from the Bank of Canada on Oct. 23. The Bank has already reduced its key overnight lending rate three times since June by a quarter point each time to 4.25%. A bigger cut of a half point could be on the table for later this month. 

Gasoline prices fell 10.7% on a year-over-year basis in September, versus the 5.1% decline seen in August. On a monthly basis, gasoline prices were down 7.1% in September following a 2.6% fall in August. The September decline was driven by lower crude oil prices amid increasing concerns over weaker economic growth, as well as lower costs associated with switching to winter blends, StatsCan said. 

However, food price growth remained stubbornly high. Prices for food purchased from stores rose 2.4% in September, the same growth rate as in August, and the second consecutive month that grocery prices increased at a faster pace than headline inflation. While prices declined on a year-over-year basis for some food items, others continued to increase and remained elevated, such as fresh or frozen beef (+9.2%), edible fats and oils (+7.8%) and eggs (+5%). 

Additionally, prices for food purchased from restaurants rose at a slightly faster pace in September (+3.5%) compared with August (+3.4%). 

But while the rate at which prices are increasing has slowed, price levels remain elevated. Compared with September 2021, the consumer price index rose 12.7% last month, StatsCan noted.  

“Canadians continue to feel the impact of higher price levels for day-to-day basics such as rent (+21%) and food purchased from stores (+20.7%), which increased during that same three-year period,” the federal agency said.