12:17 PM EDT, 09/16/2025 (MT Newswires) -- The Toronto Stock Exchange is down 140 points at midday with most sectors lower.

Healthcare and miners are the biggest decliners, down 1.25% and 0.9%, respectively. Energy, up 2.5%, is the sole gainer.

Canadian headline inflation rose to 1.9% in August, slightly below its expectations for a 2.1% reading, but still up from 1.7% in July. RBC said the removal of the carbon tax from energy prices in most provinces in April continued to bias the annual rate lower, but gasoline prices declined at a slower pace, pushing headline inflation higher and making July's slowdown short-lived.

CPI excluding food and energy products remained steady on a year-over-year basis at 2.4%, while the Bank of Canada's trim and median measures stayed elevated, hovering around 3%. All core metrics remain persistently above the BoC's 2% inflation target, underscoring entrenched inflationary pressures.

RBC said the data highlight the fine balance the BoC must strike in its policy decision tomorrow. Signs of economic softening is apparent: unemployment is rising, and second-quarter GDP contracted as trade flows weakened despite robust domestic demand. That said, early signs of recovery are emerging in the third quarter, with exports and manufacturing and wholesale sale volumes posting gains, suggesting the second quarter slowdown could be temporary.

The BoC will also have to consider upside inflation risks from sticky core inflation, resilient consumer spending, and planned fiscal stimulus that is likely more effective at addressing the targeted economic impact of trade-related disruptions than interest rate cuts, RBC said. Today's inflation report does little to sway that assessment, and RBC continues to think the BoC's decision tomorrow will be a close call between a 25 basis point cut to the overnight rate and a hold.

National Bank noted that even before today's data, the BoC seemed to be putting less emphasis on its core measures. Just look, the bank said, to the BoC's last rate statement where they explained, "based on a range of indicators, underlying inflation is assessed to be around 2.5%". National Bank doesn't think this assessment will change yet. When it comes to monetary policy, National didn't think this report would change the outcome of tomorrow's BoC decision and now it is sure it won't. National Bank said the central bank is set to ease for the first time since March. Despite slightly above target "underlying" inflation, accumulating weakness in the labour market and the presumed downward pressure that will put on inflation is the more important factor right now, even if the Bank can't be as forward looking as it would like. At this point, National also has an October cut penciled in and this data doesn't jeopardize that call.