Inflation holds steady at 3% — but here are where Canadians are still feeling the pinch

Grocery price growth, meanwhile, cooled to 2.8%, the first time in 14 months that food inflation has dropped below 3%.

The Bank of Canada has already said it won’t hesitate to raise interest rates again if inflation stays elevated and starts pushing into its closely watched core measures. So a headline number that looks frozen at 3% doesn’t mean Canadians can relax — it means the pressure has shifted to different parts of the household budget.

What’s actually pushing Canada’s inflation number?

Month-over-month, consumer prices actually fell 0.1% in August, while annual growth also matched economist forecasts of 3%. Statistics Canada’s core inflation measures, which strip out the most volatile prices, stood at 2% for CPI-median and 1.9% for CPI-trim in August, both roughly in line with the BoC’s target.

Two forces are doing most of the work behind those numbers: energy and geopolitics. Benchmark Brent crude oil crossed $100 a barrel this month, and U.S. President Donald Trump’s new 50% tariffs on Canadian goods — along with Canada’s retaliatory tariffs, which took effect September 8 — are expected to push costs higher through the fall.

Why ‘steady’ inflation feels different depending on your budget

A 3% national average hides different realities depending on how Canadians spend. Grocery shoppers are catching a break: dairy price growth slowed sharply, from 3.1% annually in July to 0.7% in August, led by cheese and yogurt. On the other hand, renters and mortgage holders saw shelter costs edge up to 1.5% annually in August from 1.3% in July.

Travellers face the steepest increase of all. The 26.1% jump in tours and travel costs is partly a base-year effect: prices had fallen sharply a year earlier, when fewer Canadians were travelling to the United States.

Could the BoC still raise rates?

The BoC held its policy rate at 2.25% in September, the seventh consecutive hold. Governor Tiff Macklem said the economy is moving broadly in line with the bank’s forecasts, though the central bank continues to watch for signs that tariff-driven costs are spreading beyond gas and travel into the wider economy.

Economists expect the real test to show up in September’s inflation data, since it will include Carney’s retaliatory tariffs. For Canadians with a variable-rate mortgage, a HELOC or a renewal coming up, that’s the number worth watching most closely over the coming months.

What Canadians can do now

Rather than budgeting off the national 3% figure, it helps to build a personal one:

• If you drive often, your real inflation rate is likely running well above the national average because of gas prices
• If grocery costs have felt lighter lately, that lines up with the broader slowdown in food inflation, though not every item is cooling at the same pace
• If a mortgage renewal is coming up in the next few months, locking in sooner rather than later reduces exposure if the Bank of Canada raises rates again
• Watch the October release of September’s CPI data, which will show the first full month of retaliatory tariffs