The short version
- Canada's headline inflation held at 3.0% in August 2026. The Bank of Canada's two preferred core measures, CPI-trim and CPI-median, read 1.9% and 2.0%.
- The central bank says it focuses on core measures because they better reflect the underlying trend, looking through temporary swings such as gasoline.
- Beneath the calm core figures, some signs of broadening: the share of items rising 3% or more climbed to 37.3%, and a three-month core reading edged up.
- Economists in a late-September Bloomberg survey expect headline inflation to average 3% over the next six months; markets are far less sure than economists about an October move.
Two numbers for the same month
When Statistics Canada released August's inflation data, the headline said one thing and the Bank of Canada's favourite measures said another.
According to Bloomberg's report, carried by Canadian Mortgage Trends, Canada's inflation was unchanged at 3% in August, matching expectations. Gasoline prices were 22.8% higher than a year earlier, easing from a 25.7% increase in July. On a monthly basis, the consumer price index fell 0.1%.
The Bank of Canada's own published table for the same month puts total CPI at 3.0%, CPI-trim at 1.9% and CPI-median at 2.0%. The Bank's target is 2%. That leaves headline a full percentage point above target while the core readings sit at or just under it.
What “core” is actually filtering out
The Bank of Canada explains on its CPI page that some prices are particularly volatile, and that in setting monetary policy it looks through transitory movements in total CPI and focuses on core measures that better reflect the underlying trend.
- CPI-trim leaves out the items whose monthly price changes are in the extreme tails: 20% of the weighted variation at the bottom and 20% at the top, so 40% of the basket each month. Which items are excluded changes from month to month.
- CPI-median takes the price change sitting at the 50th percentile of the basket, which similarly ignores the extremes.
- CPI-XFET simply removes food, energy and the effect of indirect taxes. It read 2.1% in August, up from 1.9% in July.
None of these is “the real number” and the headline is not “fake.” Headline is what a household experiences at the pump; core is what the central bank believes will persist. Borrowers should know which one a decision is likely to be based on.
What is moving under the calm surface
Core inflation is not sending an alarm, but the same Bloomberg report notes a few details that explain why the Bank of Canada is watching closely.
- The share of CPI components rising at or above 3% increased to 37.3% in August from 34.8% in July.
- A three-month moving annualized average of the Bank's core measures accelerated to 2.19%, from 2.01% the previous month.
- Rent rose 2.8% year over year, up from 2.5% in July, while grocery price growth eased to 2.8% from 3.1%.
Desjardins economist Royce Mendes was quoted saying underlying inflation remains contained, but that Bank of Canada officials will increasingly look at the coming pass-through from high oil prices. TD's Leslie Preston expects core to move up but from a very low level and to stay within the Bank's comfort zone.
What forecasters expect next
A separate Bloomberg survey, also reported by Canadian Mortgage Trends on 25 September, shows economists raising their inflation forecasts. The median forecast now has CPI averaging 3% over the next six months, 0.6 percentage points higher than the previous month's survey, and does not see a return to 2% until the third quarter of next year.
The same survey has economists expecting the Bank of Canada to hold its policy interest at 2.25% until June of next year, while traders in overnight swaps put the odds of an October increase at roughly a coin flip. Those two views do not line up, which is worth remembering the next time a headline claims to know what comes next. Economists also put the probability of a recession at 30%. Statistics Canada's next inflation report is due 19 October.
For a fuller look at the split among forecasters, see our piece on how forecasters disagree ahead of the October decision.
What this means if you hold a mortgage
The two kinds of mortgage respond to different signals, which is why it helps to know which number is which.
- Variable and adjustable-payment mortgages follow the lender's prime, which moves with the Bank of Canada's policy interest. That decision is driven by the Bank's read of core and its outlook, more than the headline.
- Fixed mortgages are priced off bond yields, which react to inflation expectations and global markets. Our piece on why fixed costs still aren't falling covers that channel.
If your renewal is within the next year, the useful step is not predicting the Bank's next move. Nobody, including the economists above, reliably does. It is knowing your own numbers: what your payment would be at a few different outcomes, when your window opens, and what your options are. Our mortgage calculators let you test scenarios on Canadian semi-annual compounding, and the renewal page explains how the process works. Structural options such as RateShield Advance are worth a conversation if a mid-term change fits your situation.
Nearly thirty years in Canadian financial services, based in Waterloo Region and working across Ontario. Most people are handed a product — you deserve a plan.
General information, not advice for your situation, and not an offer of credit. Economic figures are as published by the sources named and may be revised; forecasts are opinions, not predictions we are making. Any mortgage is subject to lender approval and final terms. Illustrative only.
Sources: Bank of Canada — Consumer Price Index (CPI) and core measures · Canadian Mortgage Trends (Bloomberg) — Canadian inflation holds at 3% amid slower gasoline price growth · Canadian Mortgage Trends (Bloomberg) — Economists see inflation running hotter in Canada, survey shows