Canadian Consumer Price Index (September 2025)

Inflation ticks higher, surpassing expectations, as underlying inflation fails to moderate

• Headline CPI inflation for September came in at 2.4% year-on-year (y/y), ahead of expectations for a 2.2% y/y print. September's reading was up from 1.9% in August. 
• Gasoline prices again provided a smaller drag to the headline, down 4.1% y/y from -12.7% last month. On a monthly basis, prices rose 1.9%, with refinery disruptions and maintenance in North America cited as factors.
• A monthly rise in travel services prices in September, rather than the typical decline, flipped the annual price change to +1.3% y/y from -9.3% y/y in August.
• Measures of underlying inflation were a mixed bag, either ticking higher or remaining unchanged in September. The Bank of Canada's (BoC) CPI-trim measure rose to 3.1% y/y (3.0% in August), while the CPI-median index was unchanged at 3.2% y/y. The CPI excluding food and energy was unchanged at 2.4% y/y and the CPI excluding the eight most volatile components and indirect taxes (CPIX) rose to 2.8% y/y from 2.6% in August. On a three-month annualized, seasonally adjusted basis the CPIX (+2.3%), CPI ex. food and energy (1.6%) and CPI-median (+2.8%) were all unchanged in September, while the CPI-trim rose to 2.6% from 2.4% in August.

Key Implications

• Underlying inflation appears to have firmed up in the past two months, but it remains within the Bank of Canada's target range. One hotter-than-expected month does not a new trend make, but it is worth monitoring whether the strength in price pressures is indicative of ongoing consumer resilience. 
• The Bank of Canada should still have room to deliver another cut. The economic outlook is fraught with risks, and the elevated unemployment rate reflects an economy with ample slack – something yesterday's Business Outlook Survey reinforced. Markets seem to agree, pricing the odds for an October cut at 69%, just a smidge lower than the 77% pre-release. 

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