OTTAWA - Statistics Canada will release its inflation data for August today. Economists surveyed by Reuters predict the annual inflation rate increased to 2 percent in August, up from 1.7 percent in July.

Core inflation, which excludes volatile items and is closely monitored by the Bank of Canada, is expected to remain around 3 percent. This figure is at the upper limit of the central bank's target range.

The inflation report is significant as it arrives just one day before the Bank of Canada is set to announce its next interest rate decision. Financial markets largely anticipate that the central bank will reduce its key lending rate by a quarter point to 2.5 percent. This expectation is based on a weakening labor market and a contraction in the economy during the second quarter.

However, RBC Economics has indicated that the decision to cut or maintain rates is a close call. They suggest there is still a possibility that the Bank of Canada may choose to keep rates steady to mitigate the risk of further inflation increases.