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[Canada's Inflation Unexpectedly Cools, Expectations of Rate Cuts Rise] ⑴ Canada's annualized inflation rate came in at 1.9% in August, below market expectations of 2.0%, signaling a moderation in inflationary pressures. Monthly data showed that the Consumer Price Index (CPI) fell 0.1% in August, compared to a 0.1% increase in the previous month, further indicating that price pressures are easing. ⑵ Although headline inflation fell short of expectations, core inflation indicators remained resilient. Data showed that the CPI median maintained an annualized growth rate of 3.1%, while the CPI trim fell slightly to 3.0% from 3.1% in July. Notably, the proportion of items in the CPI basket with increases exceeding 3% rose to 39.1%, up from 37.3% in July, reflecting continued underlying inflationary pressures. ⑶ Gasoline prices were the primary driver of the increase in August, rising 1.4% month-over-month. However, on an annual basis, the year-on-year decline in gasoline prices narrowed to 12.7% from 16.1% in July, partially dampening the decline in transportation costs. Excluding gasoline prices, the annualized CPI rose by 2.4% in August, a slight slowdown from the 2.5% increase in the previous three months. (4) This weaker-than-expected inflation data likely increases the likelihood of a Bank of Canada interest rate cut on Wednesday (Beijing time). Market expectations for a 25 basis point cut on September 17th are as high as 87%. The Bank of Canada has kept its benchmark interest rate unchanged at 2.75% since March, but recent data suggests the case for resuming a rate cut cycle is strengthening. (5) Regarding housing costs, housing prices, which account for nearly 30% of the CPI basket, rose by 2.6% in August, down from a 3% increase in July, driven by easing mortgage costs and rents. Food prices rose by 3.4%, with meat prices increasing by 7.2% year-on-year, up from 4.7% in July.