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# September's inflation climbs, driven by rising oil prices
- URL: https://www.borealian.ca/september-inflation-gasoline-bank-should-hold/
- Published: 2026-10-19T19:24:22.000Z
- Updated: 2026-10-19T19:41:29.000Z
- Description: Headline inflation rose to 3.1 per cent, driven by global oil prices. Meanwhile, core inflation components dropped to July levels. What's the Bank of Canada to do?
- Author: Innis
- Tags: Economics

Oil prices rose in September, pushing the consumer price index up by 3.1 per cent from a year earlier. This follows a 3.0 per cent increase in August, [Statistics Canada reports](https://www150.statcan.gc.ca/n1/daily-quotidien/261019/dq261019a-eng.htm?ref=borealian.ca). Meanwhile, inflation in other parts of the CPI, including groceries and housing, has begun to slow, suggesting other parts of the economy are cooling while energy heats up.

Oil shocks traditionally impact inflation in two ways. First, directly, when gasoline and heating fuel get dearer, and the headline index jumps with them. Second, if the shock lasts, costlier fuel seeps into freight, food, and services, and core inflation follows. Gasoline rose 27.8 per cent in the past 12 months, and energy as a whole rose 19.0 per cent, which StatCan ties to crude prices pushed up by war in the Middle East. According to September StatsCan, the price of energy has not seemed to bleed into the components of core inflation (food, shelter, clothes, etc.) 

The consumer price index excluding gasoline rose 2.2 per cent, slower than the month before and back to where it stood in July. Food bought from stores rose 1.7 per cent, which StatCan calls the smallest yearly gain since May 2024\. CPI-trim and CPI-median, the Bank's preferred core gauges, slowed to 1.8 and 1.9 per cent, [Statistics Canada's core-measures table shows](https://www150.statcan.gc.ca/n1/daily-quotidien/261019/t004a-eng.htm?ref=borealian.ca). Both sit under the Bank's 2 per cent target.

Meanwhile, unemployment, the jobless rate rose to 6.5 per cent in September, up from 6.4 per cent in July, [Statistics Canada](https://www150.statcan.gc.ca/n1/daily-quotidien/261009/dq261009a-eng.htm?ref=borealian.ca) reported. 

### Implications for Bank of Canada rates

Taken together, with the core inflation measures falling below the Bank's 2 per cent target, unemployment staying flat around the 10-year average, and the largest shock coming from rising oil prices due to Middle East conflicts, the Bank of Canada has increasing justification to hold the overnight rate at its next policy meeting on Oct. 28.

Tiff Macklem has spent the past week sounding readier to move than the data now requires. "With the conflict ongoing, shipments still curtailed, and refinery capacity damage, the risk that inflation broadens and becomes more persistent has gone up," the governor told reporters after an IMF meeting in Bangkok, the Financial Post reported. The central bank has now held the policy rate at 2.25 per cent for [seven straight decisions](https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/?ref=borealian.ca).

One case for raising rates comes from the Federal Reserve's decision to raise the Federal Funds Rate by 25 basis points from 3.5 to 3.75 per cent on Sept. 16\. The spread between the BoC overnight rate (2.25 per cent) and the Fed Rate may begin to depreciate the Canadian currency as investors rotate into higher-yielding US Treasuries. A depreciated loonie would result in import inflation, which could hit particularly hard as Canada enters winter and begins to import fuel and food from the US. However, this effect will most likely take longer to play out and may not warrant a rate hike this month. 

In the Bank's [Business Outlook Survey](https://www.bankofcanada.ca/publications/bos/business-outlook-survey-data/?ref=borealian.ca), 41 per cent of firms expect inflation above 3 per cent over two years. Further, firms surveyed after the CUSMA trade talk collapse on Aug. 21 were "more likely than those surveyed beforehand to report that ongoing trade tensions have raised their costs and prices," the survey adds. So there are definitely pressures that could see core inflation increase over the coming months. However, until then, the data show core inflation is under control and that we are even experiencing mild disinflation. 

A rate hike cannot lower the price of crude, nor will it necessarily stop currency depreciation. Raising rates into a gasoline spike would squeeze households already paying more at the pump.

Statistics Canada publishes October's consumer price index on Nov. 16\. If the index excluding gasoline climbs back above its August pace, or the core gauges move above 2 per cent, we may see some action from the Bank. Until then, we hold.