Canada’s inflation rate climbed back up to 2% in October, shifting expectations slightly in favour of a quarter-percentage point interest rate cut next month.<\/p>\n
The report from Statistics Canada on Tuesday said prices in October increased at a faster annual pace in five out of the eight major components of the consumer price index.<\/p>\n
A major driving factor of the uptick in headline inflation was gasoline prices on an annual basis falling to a lesser extent in October compared with September.<\/p>\n
“The back-up is no big surprise, as the combination of higher gasoline prices, a meaty annual rise in property taxes, and a tough comparable from a year ago prompted the temporary rise. Still, the report is a bit hotter than anticipated,” wrote BMO chief economist Douglas Porter in a client note.<\/p>\n
With inflation back around the Bank of Canada\u2019s 2% target, the central bank is still expected to continue cutting interest rates in the coming months, including in December.<\/p>\n
The size of the next rate cut, however, will be driven by the central bank\u2019s interpretation of economic data, including the October inflation figures.<\/p>\n
“Price pressures accelerated by more than expected in October, representing a step back for the Bank of Canada, but that follows a string of reports that were steps forward,” wrote CIBC senior economist Katherine Judge in a client note.<\/p>\n
The Bank of Canada lowered its key interest rate by half a percentage point last month in response to plummeting inflation. But it had acknowledged that price growth would likely jump back up after falling to 1.6%, making Tuesday’s report less of a surprise.<\/p>\n
Forecasters expecting a quarter-point cut say Tuesday’s report solidifies that prediction.<\/p>\n
“This heavy result should take some more steam out of the call for another 50 basis-point rate cut from the Bank of Canada in December. We have been in the 25 basis-point camp from the start and this report only reinforces that expectation,” Porter said.<\/p>\n
The central bank’s key interest rate currently stands at 3.75%.<\/p>\n
The Bank of Canada will also have new gross domestic product data to consider as well as the November jobs report before its Dec. 11 announcement.<\/p>\n
The central bank\u2019s interest rate cuts have helped take pressure off shelter price inflation as mortgage interest costs decelerate.<\/p>\n
Pressure in the rental market has also relented, with rent rising 7.3% from a year ago, down from an 8.2% annual gain in September.<\/p>\n
Property taxes and other special charges rose at the fastest annual pace since 1992, increasing 6% from a year ago. That was up from a 4.9% annual increase in October 2023.<\/p>\n
Meanwhile, grocery prices increased faster last month, rising 2.7% from a year ago.<\/p>\n
The Bank of Canada\u2019s preferred core measures of inflation, which strip out volatile prices, picked back up again last month.<\/p>\n","protected":false},"excerpt":{"rendered":"
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