Economists Expect Inflation to Rise to 2.2% in September as Gas Prices Push CPI Higher

BoC’s next rate decision in focus amid renewed inflation pressures

A rise in gasoline prices last month is expected to lift Canada’s annual inflation rate ahead of the Bank of Canada’s next interest rate decision on October 29.

According to a Reuters poll compiled by LSEG Data & Analytics, economists project inflation to climb from 1.9% in August to 2.2% in September.
Stephen Brown, Deputy Chief North America Economist at Capital Economics, predicts an even sharper increase to 2.4%, noting that base-year effects — lower gas prices last year — will amplify this year’s annual comparison.

“We’re likely to see headline inflation jump quite noticeably,”
said Brown.

Benjamin Reitzes, BMO Capital Markets’ Managing Director of Canadian Rates and Macro Strategy, expects a similar uptick to 2.2%, adding that Ottawa’s removal of counter-tariffs on U.S. goods may help offset part of the increase.

Reitzes cautioned that the timing of price relief will depend on how firms adjust to lingering trade uncertainty:

“It’ll take a few months for those price declines to fully pass through,” he said.

Statistics Canada’s previous reports showed retaliatory tariffs were raising clothing and food costs earlier this year. Economists believe that a stronger Canadian dollar in the first half of 2025 should now help ease imported inflation pressures, particularly for groceries.

💰 Policy Outlook: Another Rate Cut Possible

Tuesday’s CPI release will be the final key data before the BoC’s next policy meeting.
The central bank cut its benchmark rate by 25 basis points to 2.5% in September, shifting its focus from inflation risks toward slowing growth.

Despite an unexpected 60,000-job increase in the latest labour report, unemployment remains elevated at 7.1% — suggesting labour market slack persists.

Reitzes said another quarter-point rate cut could be possible if inflation doesn’t reaccelerate and business sentiment remains cautious.
LSEG data shows markets pricing a 64% chance of another BoC rate cut this month.

🧭 Core Inflation Under Review

Deputy Governor Rhys Mendes recently hinted that the BoC may revise how it measures core inflation, which strips out volatile components of CPI.
Current readings for CPI-trim and CPI-median hover around 3%, but the Bank estimates underlying pressures closer to 2.5%.

Reitzes said the Bank will focus less on one number and more on inflation “breadth” — how many goods are above versus below the 2% target — to assess whether inflation is stable enough for further easing.