Scotia Flash

Latest edition · September 14, 2026

scotiaflash20260914

Canada's August CPI report showed headline inflation at 3.0% y/y and traditional core inflation surging to 3.9% m/m SAAR, reinforcing the case for the Bank of Canada to raise rates in October. Scotiabank Economics warns that the central bank is behind the curve with policy rates stuck at the low end of neutral.

In this flash note, Derek Holt argues that accelerating core inflation in Canada indicates the Bank of Canada is once again falling behind the curve. For August, headline CPI registered -0.1% m/m NSA and 3.0% y/y, while traditional core inflation reached 3.9% m/m SAAR—its hottest reading since April 2025. With central tendency measures (weighted median at 2.7% and trimmed mean at 2.8% m/m SAAR) also running above target and services ex-shelter driving price pressures, Holt notes that Scotiabank's projected 3% terminal policy rate is likely too low. Current market pricing shows a 75% probability of a rate hike in October and approximately 125 bps of tightening through summer 2027.

Key takeaways from the latest edition

• 1.Canadian core inflation is accelerating well above the Bank of Canada's 2% target, supporting an interest rate hike at the October meeting.
• 2.Traditional core CPI ex-food and energy rose 3.9% m/m SAAR, while weighted median and trimmed mean measures came in at 2.7% and 2.8% m/m SAAR, respectively.
• 3.The author argues that Scotiabank's 3% terminal policy rate forecast is likely too low given zero to negative real policy rates and an output gap set to close in 1–2 quarters.

What this series covers

• Hot Core Inflation is Positioning The Bank of Canada Behind the Curve Again

Edition archive

• scotiaflash20260914

  September 14, 2026

• scotiaflash20260902

  September 2, 2026

• scotiaflash20260828

  August 28, 2026

• scotiaflash20260817

  August 17, 2026