Canada’s annual inflation rate rose to 3.1 percent in September as war in the Middle East drove gasoline prices sharply higher, according to Statistics Canada figures released on October 19, 2026. The acceleration came just ahead of the Bank of Canada’s October 28 interest rate decision.
The consumer price index climb past the central bank’s three percent upper limit for the first time in months, driven largely by a 27.8 percent year-over-year jump in pump prices. While economists polled by Reuters had anticipated a slightly steeper rise to 3.2 percent, the September data serves as the final set of domestic price figures before Governor Tiff Macklem and his governing council review monetary policy later this month, according to data published in Ottawa.
Energy Costs and Middle East Conflict Drive Gasoline Spikes
The acceleration in headline inflation was fueled primarily by energy commodities. Statistics Canada reported that overall energy prices surged 19 percent on an annual basis in September, accelerating from a 15.4 percent increase in August. Fuel oil and other home heating fuels jumped 57.8 percent, delivering a heavy blow to consumers in Atlantic Canada where oil heating remains common, the agency noted in its monthly release.
JUST IN: Canada's inflation rises to 3.1% pic.twitter.com/5JGemsPyAA
— https://x.com/kalshi/status/2112164398777143737
Those domestic cost pressures trace directly to international disruptions. Speaking from the International Monetary Fund meetings in Bangkok, Bank of Canada Governor Tiff Macklem warned that ongoing conflict in the Middle East, damage to refining capacity in the Gulf region, and the closure of the Strait of Hormuz have left global oil markets under severe strain, The Canadian Press reported. Ahead of the data, a Bloomberg survey of 12 economists anticipated the consumer price index would increase 3.18 percent year over year, while Statistics Canada noted that the national rate remained at three percent in August. Excluding gasoline, consumer prices increased 2.2 per cent year-over-year in September, and Statistics Canada core inflation measures eased slightly on a monthly basis.
You can only release strategic energy, oil reserves so many times, but that has helped contain this energy price shock.
Tiff Macklem, Governor of the Bank of Canada
Mr. Macklem noted that international reserves have been heavily drawn down—with China running down large stockpiles that will eventually require replenishment—leaving little cushion if energy shocks persist. On a monthly basis, prices increased by 0.1% in September, while the Bank of Canada’s core measure rose 2.2% over the past year and increased by 0.1% compared with the previous month.
Grocery Inflation Moderates Even as Long-Term Costs Remain High
While fuel prices accelerated, the grocery aisle offered some relief for shoppers. Food purchased at stores rose 1.7 percent year-over-year in September, slowing down from a 2.8 percent increase in August and marking the smallest yearly increase since May 2024.
Statistics Canada attributed the moderation to cheaper fresh vegetables, a 2.9 percent drop in fresh vegetable prices, and a decline in the sugar and confectionary
category. Beef prices also rose at a slower pace of 8.7 percent, down from an 11 percent increase the previous month.
Despite the recent monthly slowdown, cumulative increases over recent years remain stark. Prices for groceries have increased 33.0 per cent since September 2020, according to the statistical agency.
Shelter Costs and Core Metrics Shape the Bank of Canada’s Dilemma
Shelter prices rose 1.8 percent annually in September, ticking up from 1.5 percent in August. Rents climbed 2.8 percent, while homeowners faced continued pressure from a 4.9 percent increase in mortgage insurance costs and a 1.2 percent rise in home maintenance and repair expenses, Statistics Canada reported.
Meanwhile, the central bank’s preferred core inflation measures offered a more stable picture, easing slightly on a monthly basis. CPI-median slowed to 1.9 percent, while CPI-trim—which strips out extreme monthly price swings—stood at 1.8 percent, according to Reuters data. Underlying gauges such as Common CPI came in at 2.4%, down from 2.6%.
Financial markets have kept expectations anchored following the data release. Traders continue to price in a steady policy rate at 2.25 percent when the central bank meets on October 28, though money markets are pricing in a quarter-percentage-point rate hike for the December 9 decision. Andrew Grantham, senior economist with CIBC Capital Markets, noted in a client note that the inflation report suggests there is little rush and policymakers can take more time to assess how U.S. trade relations and the impact of new tariffs develop before raising rates,
the, Canadian Press reported. Concurrently, Mathieu Laberge, chief economist at CMHC, stated at Mortgage Professionals Canada’s 2026 National Mortgage Conference in Calgary that preliminary assessments point toward the first rate increase arriving in late Q1 or early Q2 of 2027.