Canada's inflation rate jumps to 4 per cent, making the BoC's next rate decision harder

Statistics Canada says the country's annual inflation rate rose to four per cent last month, up from 3.3 per cent in July. The rise in inflation was largely driven by gasoline prices.

Canada's inflation rate jumped to four per cent last month, as economists warn the latest consumer price index report spells bad news for the Bank of Canada.

Statistics Canada released its latest inflation reading on Tuesday, which shows the annual rate rose from 3.3 per cent in July, marking the second consecutive month inflation has risen.

Forecasters were widely anticipating inflation to come in hotter last month due to higher gasoline prices. But Tuesday's report was even more discouraging than many expected.

"What is the most concerning is that (inflation) accelerated more than (expected) and that we also saw some core measures of inflation that the Bank of Canada track, accelerate as well," said Andrew Grantham, CIBC's executive director of economics.

Core measures of inflation strip out volatility in prices and play a significant role in how the Bank of Canada judges inflationary pressures.

With this latest uptick in price growth, Grantham said inflation during the third quarter is now on track to come in higher than the Bank of Canada forecasted in July.

The central bank is slated to make its next interest rate decision on Oct. 25 -- a decision that economists say just got tougher.