Gasoline sits inside the 3 per cent headline
The Bank of Canada held its target for the overnight rate at 2.25 per cent on 2 September 2026, with the Bank Rate at 2.5 per cent and the deposit rate at 2.20 per cent. The statement says consumer price inflation has been hovering around 3 per cent in recent months, mainly on persistently higher gasoline prices; excluding gasoline, inflation was 2.2 per cent in July and measures of core inflation remained close to 2 per cent. Governing Council wrote that there has so far been little evidence of higher energy prices spreading to other components of inflation. A central bank sets the price of money rather than its quantity, and the price it set here rests on holding one line of its own basket outside the reading.[1]
The same statement puts second-quarter growth at 3.3 per cent, describes a pick-up broad-based across consumption, housing, exports and business investment, and notes the unemployment rate edging down to 6.4 per cent in July. Against that, Governing Council wrote that demand for labour remains subdued and that indicators point to continued excess supply in the economy. The council says new US tariffs and Canadian counter-tariffs will raise costs for some businesses, and that those costs could feed into consumer prices over time. What holds a strong quarter and a weak labour demand in one text is the question of where the growth came from, because an income flow does not settle into the price level until it is spent. Governing Council also wrote that the upside risks to inflation have increased and that it is prepared to adjust monetary policy as needed; the next scheduled date for announcing the overnight rate target is 28 October 2026.[1]
The pay line barely moved in August
The ADP National Employment Report says private-sector employment in the United States rose by 38,000 jobs in August, and that the July figure was revised up from 44,000 to 46,000. Goods-producing sectors lost 10,000 jobs and the loss in manufacturing was 17,000. Service-providing sectors added 48,000, of which 45,000 came from education and health services. On pay, base pay for all private-sector workers rose 3.2 per cent year over year and gross pay 4.7 per cent; base pay for job-stayers was unchanged at 3.0 per cent and base pay for job-changers rose 4.7 per cent. The service side was not uniform either: leisure and hospitality added 16,000 jobs while professional and business services lost 16,000.[2]
In the same report gross pay growth for job-stayers was unchanged at 4.4 per cent, while for job-changers it slowed from 7.5 per cent to 7.3 per cent. ADP chief economist Nela Richardson said once predictable wage growth has been overtaken by the complexities of demographic change, persistent inflation and the effects of artificial intelligence on jobs. Liv Wang of ADP Research said pay growth has been decelerating for the past four years, that among lower-paid workers base pay growth has lost momentum and that it is now slower than before the pandemic. The line standing still is the job-stayer's line, and an energy shock reaches the price level only by travelling through it.[2]
Input prices at 71.1 per cent, the employment index at 51.2 per cent
In the August manufacturing report from the Institute for Supply Management the PMI registered 54.6 per cent, 1 percentage point below July's 55.6 per cent. New orders fell 3 percentage points to 53.7 per cent, the employment index dropped 1.6 percentage points to 51.2 per cent and the backlog of orders fell 3.2 percentage points to 51.8 per cent. The prices index stayed at the same level as July, 71.1 per cent, and the production index came in at 58.3 per cent. Survey committee chair Susan Spence said pricing volatility was mentioned in 57 per cent of negative comments and tariffs in 29 per cent. The supplier deliveries index rose to 59.3 per cent and the imports index lost 3.2 percentage points to 52.5 per cent.[3]
The input-price index holds at 71.1 per cent while new orders slip to 53.7 per cent and the employment index to 51.2 per cent; ADP's August count stops at 38,000 and base pay for job-stayers stays at 3.0 per cent. The Bank of Canada, for its part, ties the headline near 3 per cent to gasoline and puts the rate excluding gasoline at 2.2 per cent. For a cost increase to settle into the price level some income has to validate it, and the pay line does not supply that validation today; the pass-through sits for now in the firm's margin and the household budget, and it has not yet reached the wage contract. The alternative reading is open too: margins may absorb the pass-through for a while, and the lag may surface in the next contract round, when wage bargaining reopens. This is no known distribution, and nobody holds the odds; what can be watched is whether the rate excluding gasoline moves off 2.2 per cent by the next rate announcement on 28 October 2026.[1], [2], [3]