Scotiabank Previews Tuesday's CPI Data in Canada

07:27 AM EDT, 09/16/2025 (MT Newswires) -- Canada updates the consumer price index for the month of August at 8:30 a.m. on Tuesday -- the day before the Bank of Canada delivers its policy decision, noted Scotiabank.

The bank estimated total CPI to be up by 0.1% month over month in seasonally unadjusted (NSA) terms. That would imply a lift of about 0.3% month over month in seasonally adjusted (SA) terms. In turn, this could buoy the year-over-year rate to 2% from 1.7% previously and partly due to a shift in year-ago base effects.

In terms of the NSA reading, August is typically a month in which there is low average seasonality in price swings, noted Scotiabank. Gasoline prices may contribute up to 0.1% to CPI, given an estimated 1.5% month-over-month NSA rise. Food is likely to be a minimal influence. Shelter is estimated to be up to a 0.1% addition.

There is high uncertainty around much of the rest of the basket. Watch for the breadth of price increases that has been trending up, stated the bank.

Key, however, is what will happen to the Bank of Canada's core inflation gauges. They were all over the map in July when traditional core -- excluding food and energy -- was just 0.8% month-over-month SAAR, while both trimmed mean CPI and weighted median CPI were up by about 2.25% month-over-month SAAR.

The preferred way of looking at the core gauges is in terms of month-over-month pressures, pointed out the bank. That's because the trimmed mean and weighted median gauges are very slow to move. They aren't spot year-over-year calculations, but rather weighted, compounded month-over-month estimates that only factor in one new month at a time, plus whatever revisions that Statistics Canada chooses to make to the monthly seasonal adjustments. By the time these measures incorporate new information, it may be too late to evaluate inflationary pressures at the margin.

A compromise is to smooth the month-over-month readings, added the bank. A three-month moving average of trimmed mean and weighted median arrives at a figure of about 2.5% m/m SAAR as of July. Scotiabank will see what happens with August, but the sensitivity of the month-over-month, calculations to slight changes combined with the absence of enough price data in advance, makes it practically impossible to estimate the readings. Still, the bank would be more surprised by as weak or weaker readings than the July release than it would be by a resurgence of core inflationary pressures.

Still, since Governor Tiff Macklem gave a speech titled "Flexible inflation targeting in a shock-prone world," which serves as a reminder that he may be comforted by the fact that the various readings are within the 1%-3% policy target range. A risk is if the governor rejects this argument.

Some analysts are holding off on their rate calls until seeing CPI. Scotiabank feels it has enough information to merit not waiting, as data dependency shifts down the list of considerations relative to the forward-looking considerations.

A large spike in core inflation measures would resurrect concern that the BoC has never cut on the back of such a reading. Whether that perspective influences the decision now or a careful bias remains to be seen, but it may be more likely to have the latter effect, according to the bank.

In any event, the forces driving inflation are much longer-term than anything to be settled by a handful of short-term readings. As trade barriers go up, border frictions rise, inventory-to-sales ratios get padded to multi-decade highs and workers demand escalating wages absent productivity, a confluence of factors centered around multi-year supply chain disruptions merits high caution by central bankers so that they don't repeat their mistakes.

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