🇨🇦 The Cost of Living Is Rising Slower… But Your Savings Rate Might Drop

Groceries still cost more, gas is cheaper, and interest rates just dropped

Big updates this week on Canada’s economy: inflation is slowing, and the Bank of Canada just cut interest rates. Here’s what you need to know.

1. Inflation Update – August 2025

The cost of living is still rising, but more slowly. Canada’s inflation rate hit 1.9% in August (up from 1.7% in July). Economists had expected 2.0%, so it came in slightly below forecast.

Here’s what’s behind the numbers:

• Food: Up 3.4%, with beef leading at +12.7%.

• Shelter: Up 2.6%, as rents and mortgages stay high.

• Clothing: Up 1.7%.

• Gasoline: Down 12.7%, helping to offset price pressures.

Core inflation (which removes gas and fresh food) stayed at 2.4%. Nearly half of the everyday items tracked are still climbing above 3%.

2. The Bank of Canada Steps In

With inflation under control and the economy showing weakness, the Bank of Canada cut its key interest rate by 0.25% (from 2.75% to 2.5%). This is the first cut since March.

Why the cut?

• Canada’s economy (GDP) shrank last quarter.

• Unemployment is ticking higher.

• Inflation is near the Bank’s 2% target.

💰 What This Means for Your Money

1. Borrowing may get cheaper: Mortgages, loans, and lines of credit could see lower rates (depending on your lender).

2. Savings accounts may pay less: When the Bank of Canada cuts rates, banks usually lower the rates they pay on savings accounts and GICs.
   If you’re with a High-Interest Savings Account (like Wealthsimple or EQ Bank), don’t be surprised if you get an email soon about your rate changing.

3. The economy is at a crossroads: The Bank of Canada is trying to support growth without letting inflation heat back up.

3. 3 Quick Action Steps for You

1. Check your savings rates: log into your HISA or GIC accounts and see if rates have changed.

2. Review your debt payments: lower interest rates may give you a chance to pay down loans faster.

3. Mark October 29: that’s the next Bank of Canada decision date, and another rate cut could shift things again.

✅ In short:

Prices are still rising, but slower. Food costs remain sticky, gas is helping ease pressure, and now interest rates are moving down.

Good news if you’ve got debt, less exciting if you’re a saver.

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