Economists expect inflation was steady in August as gasoline prices dropped from earlier in the summer, but the trade war between Canada and the United States will likely put some pressure on consumers’ wallets later on.
Statistics Canada is set to release its latest consumer price index for August on Monday.
A Reuters poll of economists expects annual inflation held at three per cent last month, according to LSEG Data & Analytics.
“We’re expecting the headline number to not go above three per cent,” said Tu Nguyen, an economist at RSM Canada.
“We are still seeing the inflationary pressure coming solely from gasoline prices, energy prices. The rest of the economy is pretty stable.”
Volatile gas prices throughout the spring and summer have been driven by the war in Iran. Hostilities between that country and the United States were “less turbulent” in August, said Nguyen, but in recent days crude prices hovered around US$100 per barrel.
“So that period of a little bit more peace has ended,” she said.
“The longer that goes on, the more it sort of spreads throughout the economy because everything we buy has to go through some transportation channel. If gasoline prices are higher, electricity prices are high, then everything gets more expensive.”
Despite slight relief at the pumps in August on a monthly basis, gas prices were still up 23 per cent from a year ago, said RBC economists Nathan Janzen and Abbey Xu in a note.
Earlier this month, the Bank of Canada left its key policy rate unchanged at 2.25 per cent, marking the seventh consecutive hold. The central bank has been monitoring whether cost pressures from the war in Iran could spark additional inflationary concerns for consumers.
But with the economy moving broadly in line with the bank’s forecasts, governing council opted to keep the policy rate unchanged, Bank of Canada governor Tiff Macklem had said.
“The Bank of Canada warned in September again that significant spillover from higher energy prices into broader inflation could push policymakers to raise interest rates,” Janzen and Xu wrote.
“But actual evidence of that pass-through to-date has been limited beyond the direct impact on gas prices and highly energy-intensive products like airfares. Measures of inflation breadth have been stable, suggesting price pressures remain concentrated in a relatively narrow set of categories.”
RBC sees the central bank holding its key rate steady for the rest of the year, with gradual hikes likely to come in 2027.
“But the path forward depends critically on whether underlying inflation remains near target and the broader recovery stays on track. The risk of earlier hikes has been growing,” Janzen and Xu said.
Prices could also face upward pressure in the months to come due to the escalating trade dispute. U.S. tariffs hit a range of Canadian goods on Aug. 22, prompting Canada’s counter-tariffs on American products that took effect Sept. 8.
Increases in consumer prices could be reflected in September data, however Nguyen cautioned that those retaliatory levies are “not going to have a huge impact on inflation overall.”
“For a lot of these products, there are substitutes, so the Canadian household can choose to buy a Canadian product or a product that’s imported from Europe or Asia that is not from the U.S.,” she said.
“A 50 per cent tariff is basically going to translate into no one buying that particular product.”
This report by The Canadian Press was first published Sept. 11, 2026.
