Canadian Consumer Price Index (August 2025)

Inflation ticks higher but falls short of expectations opening door for Bank of Canada 

• Headline CPI inflation for August came in at 1.9% year-on-year (y/y), below expectations for a 2.0% y/y print. August's reading was up from 1.7% in July. 
• Gasoline prices provided a smaller drag to the headline, down 12.7% y/y from -16.1% last month. On a monthly basis, prices rose 1.5% as higher refiner margins offset lower crude prices.
• Prices for cellular services also fell at a slower pace (-1.2%) compared with July (-6.6%) as fewer back-to-school sales were available. Providing an offset was a steeper contraction in travel services (-3.8% y/y in August), with lower demand for destinations in the U.S. being cited by Statistics Canada as a contributor.
• The Bank of Canada's (BoC) CPI-trim measure dipped to 3.0% y/y (3.1% in July), while the CPI-median index was unchanged at 3.1% y/y. The CPI excluding food and energy ticked down to 2.4% y/y from 2.5% the month prior and the CPI excluding the eight most volatile components and indirect taxes (CPIX) was unchanged at 2.6% y/y. On a seasonally adjusted monthly basis the CPIX (+0.19% from 0.06%), CPI ex. food and energy (0.13% from 0.07%) and CPI Median (0.23% from 0.14%) all accelerated in August. The CPI trim was the outlier, moderating slightly to 0.19% m/m from 0.23% m/m in July.

Key Implications

• Momentum in the right direction from inflation this month, as the expected lift from energy prices had a smaller impact than expected. Moreover, even though three of the core indexes moved higher on the month, the trend towards cooler prints remains favourable.      
• Looking forward, the Bank of Canada should have room to cut at its meeting tomorrow. The economy continues to show signs of waning momentum as the unemployment rate ticks higher and job losses accumulate. Moreover, the termination of many retaliatory tariffs will help provide some offset to price pressures. 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. 

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