Canadian inflation holds at 3.0% as easing food and gas prices offset travel costs
Canada’s headline inflation rate held at 3.0% year over year in August, matching July’s reading and remaining below the post-Iran-conflict peak of 3.2%. Gasoline prices remained a key driver, up 22.8% from a year earlier, though the pace of increase eased from July’s 25.7% gain. Higher costs for travel tours, air travel, and rent kept inflation elevated. Food prices offered some relief, rising 2.8% — below the overall inflation rate for the first time in over two years. The Bank of Canada’s (BoC) preferred core measures — trimmed-mean and median — held steady at 1.9% and 2.0%, close to the central bank’s target.
Why this matters: With core inflation remaining close to target even as headline inflation holds above it, the report suggests underlying price pressures remain relatively contained despite the ongoing drag from energy and travel costs. The BoC will have one more inflation reading before its next rate decision, with officials likely to keep weighing how the Iran conflict and Canada-U.S. trade tensions could shape the path of prices ahead.
Fed raises rates for first time since 2023 in unanimous, hawkish decision
The Federal Reserve (Fed) raised its benchmark interest rate by 25 basis points to a range of 3.75%–4.00% during the week, marking its first hike since 2023 and the first under Chair Kevin Warsh. The move was driven by persistent inflation, with policymakers noting that while labour market conditions remain healthy, price pressures remain elevated and continue to warrant a restrictive policy stance. The decision passed unanimously, and updated projections showed 16 of 18 officials anticipate at least one more quarter-point hike before year-end.
Why this matters: Chair Warsh struck a hawkish tone at the press conference, emphasizing concerns over sticky underlying inflation and suggesting current policy is not yet restrictive enough to bring price growth back to target. With most officials anticipating an additional hike this year, and some even forecasting further increases in 2027, the Fed appears prepared to keep raising rates until inflation shows clearer signs of returning to target.
| Index† | Change (%) | Index Level | |||
|---|---|---|---|---|---|
| Week | MTD | YTD | 1 Yr | ||
| Treasury Bill | 0.04 | 0.10 | 1.60 | 2.30 | 194 |
| Canadian Bonds | 0.59 | -0.65 | -0.21 | -0.33 | 1,197 |
| Canadian Equities | 0.36 | -1.13 | 14.73 | 24.44 | 35,807 |
| U.S. Equities | -0.06 | -0.38 | 12.69 | 16.69 | 7,651 |
| International Equities | -1.58 | -2.68 | 11.27 | 17.30 | 3,143 |
| Emerging Market Equities | -0.55 | -0.35 | 23.90 | 29.93 | 1,711 |
| European Equities | -0.55 | -2.34 | 10.31 | 17.99 | 212 |
| Currencies† | Change (%) | Exchange rate | |||
|---|---|---|---|---|---|
| Week | MTD | YTD | 1 Yr | ||
| C$/US | -0.82 | -0.94 | -1.87 | -1.35 | 0.72 |
| C$/Euro | 0.18 | 0.21 | 0.35 | 1.24 | 0.62 |
| C$/Pound | 0.17 | 0.23 | -1.28 | -0.17 | 0.53 |
| Commodities (US$)† | Change (%) | Price | |||
|---|---|---|---|---|---|
| Week | MTD | YTD | 1 Yr | ||
| WTI Crude Oil ($/Barrel) | 0.25 | 16.95 | 76.12 | 62.25 | 100 |
| Gold ($/oz) | 0.36 | -1.26 | -1.61 | 15.71 | 4,425 |
Treasury Bill is represented by the FTSE Canada 60 Day T-Bill Index (C$), Canadian Bonds represented by the FTSE Canada Universe Bond Index (C$), Canadian Equities represented by the S&P/TSX Composite TR Index (C$), U.S. Equities represented by the S&P 500 TR Index (US$), International Equities represented by the MSCI EAFE GR Index (US$), Emerging Market Equities represented by the MSCI EM GR Index (US$), European Equities represented by the MSCI Europe Index (€). It is not possible to invest directly in an index. Assumes reinvestment of all income and no transaction costs or taxes.
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