Canada's Inflation Rises to 3.1% as Fuel Oil Prices Jump 58%

Canada's annual inflation rate rose to 3.1% in September, up from 3.0% in August, according to Statistics Canada. The increase was primarily driven by surging fuel oil prices, which jumped 58% year-over-year. Gasoline prices also climbed 27.8% from a year earlier, though the switch to a cheaper winter blend helped temper the growth.

Fuel oil and other fuels experienced an even steeper rise of 57.8%, with Atlantic Canada bearing the highest burden, as many homes in the region rely on oil for heating. The energy index climbed 19% from the previous month, while transportation costs rose 8.4%.

Grocery prices, however, rose more modestly at 1.7%, marking the smallest annual increase since May 2024. This is largely due to a decline in the prices of fresh vegetables by 2.9% and sugar and confectionery by 2.7%. Beef prices, on the other hand, increased by 8.7%, down from 11% in August. Since September 2020, grocery prices have risen by 33%.

Shelter costs climbed 1.8%, up from 1.5%, driven by a 4.9% increase in home and mortgage insurance and a 1.2% rise in home maintenance and repair. Rent in the region rose 2.8%, staying flat from August, while mortgage interest costs fell by 0.2%. Excluding energy costs, Nova Scotia experienced the fastest price growth in Atlantic Canada at 3.3%.

The headline inflation figure fell short of the 3.2% forecast. On a seasonally adjusted basis, prices rose by 0.4% from August. The Bank of Canada is scheduled to decide on interest rates on October 28, with its policy rate currently at 2.25%. Prior to the release of the data, market expectations were for a nearly quarter-point hike by the year's end.

In July, the central bank projected inflation would ease to around 2.5% in the second half of 2026. Governor Tiff Macklem cautioned that sustained high global energy prices could push up Canada's inflation expectations.