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The price of gas was still down 12.7 per cent annually in August – the end of the consumer carbon price has deflated costs for motorists since the spring – but the decline fell short of July’s 16.1 per cent drop, pushing the headline inflation rate higher.

Heading into the release, economists had broadly expected inflation would rise to two per cent, from 1.7 per cent in July.

Stripping out gas prices, inflation came in at 2.4 per cent in August, down a tick from the past three months.

Economists weighing in shortly after the morning data release argued the Bank of Canada is now clear to resume rate cuts on Wednesday.

Inflation data show it was a mixed bag at the grocery store last month.

The cost of groceries rose 3.5 per cent annually in August, up a tenth of a point from July.

StatCan said price growth for meat accelerated to 7.2 per cent in August from 4.7 per cent the previous month as the cost of fresh and frozen beef surged 12.7 per cent.

Meanwhile, the cost of fresh fruit fell 1.1 per cent, reversing course on a 3.9 per cent gain in July, thanks largely to lower prices for grapes and cherries.

Rising rents and mortgage interest costs remain the biggest factors pushing the annual inflation rate higher.

StatCan said fewer back-to-school deals for cellphone plans meant prices for cellular services also rose on a monthly basis in August.

Weak Canadian demand for visiting the United States last month meanwhile helped push prices for travel tours down 9.3 per cent compared with a year ago, the agency said.

The Bank of Canada will have a day to digest the new price readings before it makes its interest rate decision on Wednesday.

The bank held its benchmark interest rate steady at 2.75 per cent in three consecutive decisions as it waited for more information on how the United States’ tariff dispute would affect the economy and inflation.

“Inflation remained largely unthreatening in August, making the expected Bank of Canada interest rate cut tomorrow a relatively easy decision,” said CIBC senior economic Andrew Grantham in a note to clients Tuesday morning.

He noted that while the Bank of Canada’s closely watched core inflation metrics were largely unchanged around three per cent annually in August, the short-term trends were cooler.

That supports CIBC’s call for a quarter-point cut this week and a second to follow in October, lowering the Bank of Canada’s policy rate to 2.25 per cent.

TD Bank senior economist Andrew Hencic said in a note to clients that the August report means the central bank “should have room to cut at its meeting tomorrow.”

The end of Ottawa’s retaliatory tariffs against the United States, combined with signs the economy has stalled and the labour market is struggling, will relieve pressure on inflation enough to ease any lingering inflationary concerns at the central bank, he argued.

“We maintain the view that the BoC will have room to deliver two cuts this year to support growth and keep inflation in the target range,” Hencic said.

This report by The Canadian Press was first published Sept. 16, 2025.