Canada’s September inflation print landed where Governor Tiff Macklem said it would: higher, and driven by fuel. The consumer price index rose 3.1 percent from a year earlier, up from 3.0 percent in August and just below the 3.2 percent analysts polled by Reuters had forecast, Statistics Canada said on Monday. Gasoline rose 27.8 percent year on year, energy overall rose 19.0 percent, and fuel oil jumped 57.8 percent, a burden concentrated in Atlantic Canada. Excluding gasoline, inflation slowed to 2.2 percent from 2.4 percent. Prices rose 0.1 percent on the month. Grocery inflation eased to 1.7 percent, the smallest annual increase since May 2024, shelter rose 1.8 percent with rent up 2.8 percent, and the bank’s preferred core measures stayed contained, with CPI median at 1.9 percent and CPI trim at 1.8 percent.
The surveys released the same afternoon carry the harder question. The Business Outlook Survey indicator improved to minus 0.33, still modestly negative, the share of firms expecting a recession fell to 6 percent from 17 percent, the lowest since the question was introduced in 2023, and firms expect wage growth of about 3.4 percent over the next year. Expectations for input and output price growth eased but stayed elevated, and more firms said they plan to pass on cost increases tied to the Middle East war and tariffs. Most interviews, conducted between August 6 and September 2, predated the breakdown of Canada US trade talks, and responses gathered after it point the other way, the bank said.
Consumers are the concern. In the Canadian Survey of Consumer Expectations, five year inflation expectations jumped to 3.91 percent from 3.39 percent, rising to match elevated short term expectations, at 4.03 percent for the next year and 3.88 percent over two years. Respondents cited trade tensions and energy prices, expectations at every horizon moved higher after trade talks broke down, and spending plans deteriorated even as reported financial health improved. Long term expectations catching up with short term ones is the pattern central banks describe as de-anchoring risk.
Markets read the two releases together as a sequencing problem, not an October problem. Money markets expect the Bank of Canada to hold its policy rate at 2.25 percent on October 28, when it publishes the significant upward forecast revision Macklem promised on October 17, and price a 25 basis point increase in December. The September print is the last consumer price data before that decision.