Canada’s inflation rate rose to two percent last month, up from 1.6 percent in September, as gasoline prices exerted less downward pressure on annual price growth.
The report from Statistics Canada on Tuesday says prices in October increased at a faster annual pace in five out of the eight major components of the consumer price index.
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.
With inflation back around the Bank of Canada’s two percent target, the central bank is still expected to continue cutting interest rates in the coming months, including in December.
The size of the next rate cut, however, will be driven by the central bank’s interpretation of economic data, including the October inflation figures.
Forecasters expecting a quarter-point cut say Tuesday’s report solidifies that prediction.
“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,” wrote BMO chief economist Doug Porter in a client note.
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.
The central bank’s interest rate cuts have helped take pressure off shelter price inflation as mortgage interest costs decelerate.
Pressure in the rental market has also relented, with rent rising 7.3 percent from a year ago, down from an 8.2 percent annual gain in September.
Property taxes and other special charges rose at the fastest annual pace since 1992, increasing six percent from a year ago. That was up from a 4.9 percent annual increase in October 2023.
Meanwhile, grocery prices increased faster last month, rising 2.7 percent from a year ago.
The Bank of Canada’s preferred core measures of inflation, which strip out volatile prices, picked back up again last month.
