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 had 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 removing.
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 Information:
- 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 operating above 3%, up from 37% in July
- Markets are pricing in 87% odds of a Wednesday fee lower
Hyperlink to Statistics Canada August 2025 CPI Report
With underlying worth pressures nonetheless operating scorching, merchants stored their fee lower expectations in verify. Markets are pricing a 25bp lower on Wednesday whereas dialing again hopes for aggressive easing down the street.
Market Reactions
Canadian Greenback vs. Main Currencies: 5-min
Overlay of CAD vs. Main Currencies Chart by TradingView
The Canadian greenback, which ticked greater 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 house for the day. That second wave of promoting pushed CAD deeper into the crimson in opposition to a lot of the majors.
Late within the day, although, a little bit of brief protecting confirmed up. With the Fed’s determination looming on Wednesday, merchants seemingly squared positions and helped CAD claw again some floor, particularly in opposition to the commodity currencies.
By day’s finish, the Loonie completed blended, gaining in opposition to the Aussie, Kiwi, and the Buck, however closing within the crimson in opposition to protected havens CHF and JPY and European currencies EUR and GBP.
The persistent CAD weak spot regardless of sticky core inflation close to 3% urged markets had been extra centered on the headline miss and the probability of a BOC lower on Wednesday. The upcoming FOMC determination additionally stored merchants cautious, with many choosing the protection of havens and euros over the commodity-linked Loonie.
