Inflation Holds at 3% — Which Way Is the Bank of Canada Leaning Now?

What Statistics Canada actually reported

Canada's Consumer Price Index held at 3% year over year in August 2026, Statistics Canada reported on September 14 — unchanged from July and exactly matching the median estimate in a Bloomberg survey of economists. On a monthly basis, the index actually fell 0.1%, also matching forecasts.

The Bank of Canada's own preferred core measures — the median and trim gauges it watches to filter out one-off swings — held steady too, at 2% and 1.9% respectively, according to the same release.

Gasoline remained the single largest contributor to the annual figure, up 22.8% year over year in August after a 25.7% increase in July. Statistics Canada and Canadian Mortgage Trends, reporting on the release, both pointed to the conflict in the Middle East as continuing upward pressure on energy costs even as the annual pace of gasoline's climb slowed. Travel tours moved the other way, accelerating to 26.1% annual growth from 15.2% in July, partly on a base-year effect.

Rent told its own story inside the release. It rose 2.8% annually, but 0.8% of that came in August alone — meaning more than a quarter of the past twelve months of rent growth landed in a single month. Working against the headline figure, homeowners' replacement costs, driven largely by new home prices, fell 1.9% over the year, the biggest single drag on the index.

Why economists are watching the details more than the headline

A flat headline figure can hide a shift underneath it, and this release had one. The share of Consumer Price Index components rising at or above 3% climbed to 37.3% in August from 34.8% in July — meaning price pressure widened even though the average didn't move. A three-month moving annualized measure of the Bank's own core gauges accelerated to 2.19%, up from 2.01% the month before, and the annual figure excluding food and energy rose to 2.1% from 1.9%.

Desjardins Group economist Royce Mendes, quoted in Bloomberg's coverage of the release, put it plainly: underlying pressure remains contained for now, but Bank of Canada officials will be watching closely for how much of the current run-up in oil costs eventually passes through into everything else. Governor Tiff Macklem had already flagged the risk earlier in September, warning that the longer the Middle East conflict continues, the more likely elevated energy costs are to feed into broader pricing across the economy.

What markets are pricing for October 28

The August release didn't change what traders think comes next. In the overnight swaps market, Bloomberg reported odds of roughly 75% that the Bank of Canada moves its benchmark higher at its next scheduled announcement on October 28 — unchanged by the CPI print itself, since it matched what those odds already assumed.

Not every economist agrees that's the likely outcome. TD's Leslie Preston, in a note to investors cited in the same coverage, argued the case for a move higher may be premature: growth looks set to slow in the third quarter, and the Bank's core measures remain close to its 2% target even as the headline number holds at 3%. Both readings can be correct at once — a genuine risk the Bank is watching, and a genuine case that the risk hasn't yet become the base case.

What isn't in dispute is the direction of the language. The Bank's own September 2 statement, holding its benchmark at 2.25% for just over ten months running, already described the risks to inflation as "upside" rather than balanced. This release didn't soften that description — if anything, the broadening measures underneath the headline number reinforce it.

Ontario's own inflation number, and why it doesn't change the calculus

Better Dwelling's analysis of the same Statistics Canada release adds a detail worth sitting with if you're in Ontario: this province's own annual inflation figure ran at 2.4% in August — the only province below the 3.0% national line. British Columbia matched the national figure exactly, and the other eight provinces all ran hotter, led by Nova Scotia at 5.1%.

The gap is a reminder that a single national figure, in either direction, is always an average of very different local conditions — rent pressure in one province, a slower housing correction in another. It's useful context. It isn't a forecast for what your own mortgage does next.

What this means if you're deciding before October 28

None of this is a forecast, and treating a 75% probability as a certainty would be a mistake in either direction. What it does mean is that anyone renewing, or choosing between a variable and a fixed mortgage, before the Bank's next announcement is deciding under a statement that has already flagged upside risk — not a clean hold with balanced language either way.

• A straight renewal with your existing lender doesn't re-run the mortgage stress test. Switching lenders at renewal does — which is its own decision, separate from the fixed-versus-variable one.
• A readvanceable structure, the kind behind our RateShield Advance page, can matter more in a period where the direction of borrowing costs is genuinely uncertain — it's worth understanding before you sign, not after.
• Modelling your own numbers under a couple of different scenarios, rather than assuming a national figure applies to your file, is the useful exercise here — our calculators let you do that without committing to anything.

A national print is built from millions of files at every stage of their term. Your renewal date, balance and structure are specific to you, and that's what actually determines your outcome — not which way the country's headline figure moved last month.