19 Nov: Canada’s inflation rate rose to 2% in October, marking a shift in expectations toward a smaller, quarter-percentage point interest rate cut by the Bank of Canada in December. Statistics Canada reported that prices increased at a faster annual pace in five of the eight major components of the consumer price index, driven by a moderated decline in gasoline prices.
BMO’s chief economist, Douglas Porter, described the rise as a “mild disappointment,” noting that it highlights the unpredictable path of inflation. Similarly, CIBC senior economist Katherine Judge pointed out that while the report represented a step back, it followed several months of progress.
The Bank of Canada, whose current key interest rate stands at 3.75%, had previously cut rates by half a percentage point in response to declining inflation. However, the rebound in inflation aligns with its earlier warnings. Economists now predict a more modest cut next month, as the central bank assesses additional data, including GDP and employment figures.
While grocery prices climbed by 2.7% compared to a year ago, rent increases slowed to 7.3%, down from 8.2% in September. Property taxes and special charges rose at the fastest pace since 1992, with a 6% annual increase.
Inflation in the U.S. also ticked up to 2.6% in October, with Federal Reserve Chair Jerome Powell signaling a cautious approach to rate cuts. Analysts warn that the Bank of Canada should avoid a larger cut to maintain economic stability while inflation remains persistent.
The Bank of Canada’s next announcement is scheduled for December 11, with the latest economic indicators shaping its decision.
