Increased gasoline prices have brought Canada’s inflation rate up to an annual pace of 4%, according to a Consumer Price Index report published by Statistics Canada on Tuesday.
The basis for the annual rate rose by 0.7% as a direct result of rising fuel costs. Last month, gas prices shot up by 4.6% and have risen by 0.8% compared to the same time period from last year.
Increased costs to fuel prices have a rippling effect on the prices of almost all other goods as it increases their cost of production and transportation.
The cost of shelter increased by 6% from January to August, going up from 5.1% in July. The cost of rent increased on average by 6.5% across Canada.
The interest costs on mortgages also rose again by another 2.7%, making for a total increase of 30.9% since the beginning of the year.
Fortunately, the cost of food has decreased from 11% last year to 6.9% in 2023. Last month the price of food went down by 0.4% from July.
“I do think that the rate of inflation for groceries will continue to decelerate,” said CIBC executive director of economics Andrew Grantham, according to CTV News.
“(But) if you’re the average Canadian, average household, you don’t want prices to just stop rising, you want them to kind of come down a little bit from these very high levels. I’m not sure that’s going to happen anytime soon, unfortunately.”
High prices at the grocery store have been a serious problem for Canadian families with many being forced to spend a large portion of their earnings on food or rely on food banks, which are already understocked.
On Monday, Industry Minister Francois-Philippe Champagne met with executives from some of Canada’s biggest grocers to discuss what can be done to stabilize food costs. Champagne said the grocers have agreed to work alongside the federal government to ensure stability with food pricing, however he provided few details on how said stabilization would be implemented.
“What is the most concerning is that (inflation) accelerated more than (expected) and that we also saw some core measures of inflation that the Bank of Canada track, accelerate as well,” said Grantham.
Grantham said that because inflation in the third quarter is now on track to be higher than what the Bank of Canada had initially forecasted in July, there is a chance that the central bank will have to raise interest rates again when they make their next decision on Oct. 25.
“This is a very difficult decision,” said Grantham. “Our view at the moment is that they’re going to place weight on the weakening of the economy,”
Bank of Montreal economist Doug Porter said he believes that the unexpected increase in overall inflation will likely affect the recent pause on rate hikes by the Bank of Canada.
“Things just got a lot more interesting for the Bank of Canada, and most definitely not in a good way,” said Porter.