Canada’s annual inflation fee rose to 1.9% in August from 1.7% in July, coming in barely cooler than the two.0% economists have been anticipating forward of the Financial institution of Canada’s (BOC) fee determination on Wednesday.
The uptick was largely pushed by gasoline costs falling much less dramatically than in earlier months, down 12.7% year-over-year in comparison with July’s 16.1% decline. The smaller decline displays fading base results from April’s carbon tax elimination.
In the meantime, core inflation measures remained stubbornly elevated across the 3% mark, with CPI-median holding at 3.1% and CPI-trim dipping barely to three.0% – nonetheless nicely above the BOC’s consolation zone.
Key Factors from Canada’s August 2025 CPI Knowledge:
- Headline CPI rose to 1.9% y/y (from 1.7%), lacking the two.0% consensus
- Core inflation caught close to 3% with a median of three.1%, trim at 3.0%
- Gasoline costs fell 12.7% y/y as carbon tax base results fade
- Meat costs surged 7.2%, driving grocery inflation to three.4%
- 39% of CPI basket working above 3%, up from 37% in July
- Markets are pricing in 87% odds of a Wednesday fee minimize
Hyperlink to Statistics Canada August 2025 CPI Report
With underlying value pressures nonetheless working scorching, merchants saved their fee minimize expectations in test. Markets are pricing a 25bp minimize on Wednesday whereas dialing again hopes for aggressive easing down the highway.
Market Reactions
Canadian Greenback vs. Main Currencies: 5-min
Overlay of CAD vs. Main Currencies Chart by TradingView
The Canadian greenback, which ticked larger simply earlier than the U.S. session opened, weakened throughout the board on the CPI launch. Merchants didn’t just like the headline miss, and CAD sank for about an hour whereas merchants chewed on the information.
The Loonie caught a fast breather mid-morning, solely to get knocked down once more after London went residence for the day. That second wave of promoting pushed CAD deeper into the pink towards many of the majors.
Late within the day, although, a little bit of quick masking confirmed up. With the Fed’s determination looming on Wednesday, merchants seemingly squared positions and helped CAD claw again some floor, particularly towards the commodity currencies.
By day’s finish, the Loonie completed combined, gaining towards the Aussie, Kiwi, and the Buck, however closing within the pink towards protected havens CHF and JPY and European currencies EUR and GBP.
The persistent CAD weak spot regardless of sticky core inflation close to 3% advised markets have been extra targeted on the headline miss and the probability of a BOC minimize on Wednesday. The upcoming FOMC determination additionally saved merchants cautious, with many choosing the protection of havens and euros over the commodity-linked Loonie.
