Canada’s inflation rate rose 0.1 percent this month – according to Statistics Canada’s latest report – but Canadians who continue to see their cost of living steadily climb aren’t likely to take solace in any increase, no matter how small.
The Consumer Price Index (CPI), which tracks changes in the prices Canadians pay for goods and services and is used to measure inflation, sits at 3.1 per cent, just above the country’s target inflation rate of 2 to 3 per cent, while grocery prices also rose by just 1.7 per cent – the smallest yearly increase since May 2024. Still, that silver lining wears thin when looking at the accumulation of increases over the years.
“Despite the year-over-year slowdown in prices for groceries, prices have increased 33.0 per cent since September 2020,” StatCan said. In October, the government mailed out the second installment of the Canada Groceries and Essential Benefit, which should help low-income seniors defray some of the added costs.
The higher prices are largely due to the ongoing conflict in the Middle East, which has pushed benchmark oil prices to their highest level since May with gas prices increasing 27.8 per cent year-over-year – following a 22.8 per cent annualized increase in August.
Excluding gasoline, the CPI rose 2.2 per cent, after increasing 2.4 per cent in August. Leslie Preston, managing director and senior economist at TD Bank Group, told the Financial Post that she was “pleasantly surprised” at the report but warned that “We do expect core inflation pressures to pick up as businesses likely need to pass on some of these higher costs in their end prices.”
Many Canadians may already be at their limit. According to a recent study from the C.D. Howe Institute, spending exceeded disposable income among the bottom three household income groups, which together represent 60 per cent of households. As a result, more Canadians are also accumulating debt to stay afloat. This has seen total Canadian consumer debt climb past $2.6 trillion, giving Canada one of the highest household debt-to-GDP and debt-to-disposable income ratios in the G7.
Monday’s report is the last temperature check on the Canadian economy before the Bank of Canada announces its overnight interest rate at the end of the month. The rate – which influences borrowing costs across the economy, including interest rates on variable-rate mortgages and some lines of credit – held steady last month, but Bank of Canada governor Tiff Macklem has expressed concern that the ongoing conflict in the Middle East could make inflation more persistent.
“Our beacon is our two per cent inflation target, and we are committed to keeping inflation close to target over time,” he told reporters over the weekend, before hinting at a rate hike. “We’re prepared to adjust monetary policy as needed.”
