Mixed Measures? CPI Up in Canada and Down in the US

While inflation in Canada accelerated to the fastest pace since 2003, U.S. prices rose at their slowest pace in six months.

In August, Canada's consumer price index rose 0.4% from July and 4.1% from a year earlier. The print marked the fifth consecutive month of inflation readings above the Bank of Canada's 3% cap. Higher housing costs have been cited as the reason for the surge.

Core inflation is meant to gauge price changes in items that exclude volatile goods like food and energy. The Bank of Canada's average preferred measures for underlying core inflation in August was 2.57% or the highest level since March 2009.

Meanwhile, U.S. inflation came in lower than consensus, rising 0.3% from July and up 5.3% from a year earlier. The number is the smallest advance in several months and snapped a string of hefty gains and suggested that some of the upward pressure on inflation is beginning to wane.

Excluding the volatile food and energy components, so-called core inflation climbed 0.1% from the prior month, reflecting a decline in the prices of used cars, airfares and auto insurance. However, the cost of food both at grocery stores and at restaurants — rose sharply again in August. Prices also increased for gasoline, new autos, home furnishings and rent.

The data will likely validate Fed officials and the Biden administration that high inflation has peaked and any further gains will prove temporary.

Both central banks are expected to stand by their transitory inflation stance. And while President Biden may see some relief from criticism about his debt-fueled policies, the effects for Canada may be greater as the nation prepares to go to the polls. The number may spell a political headache for Prime Minister Justin Trudeau only a few days before an election.