Canada inflation slows to 3.1% in October

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Consumer prices in Canada rose at the slowest pace since June, a reassuring sign to central bank policymakers that rates are now high enough to significantly cool inflation pressures.

The consumer price index rose 3.1 per cent in October from a year earlier, following a 3.8 per cent increase in September, Statistics Canada reported Tuesday in Ottawa. That matched the median estimate in a Bloomberg survey of economists. The slowdown was largely due to lower gasoline prices, while the biggest contributors to the increase remain mortgage interest costs, food and rent.

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On a monthly basis, the index rose 0.1 percent, matching expectations and following a 0.1 percent drop in September.

Short-term Canadian bonds pared earlier gains, taking the benchmark two-year yield to 4.4 percent as of 8:42 a.m. ET. The Canadian dollar saw a modest rebound to 72.99 cents.

Two key measures of annual inflation that are closely monitored by the Bank of Canada and filter out components with more volatile price fluctuations (the so-called average core and trim rates) declined, averaging 3.6 percent from 3.6 percent. .8 percent revised upwards a month earlier. . That was also in line with the survey’s forecasts.

Another key measure, a three-month moving average of underlying price pressures, fell at an annualized rate of 2.96 percent from 3.67 percent the previous month, according to Bloomberg calculations. It’s an important metric because Bank of Canada Governor Tiff Macklem has said policymakers are watching it closely to understand inflation trends.

“As you dig deeper below the surface, there’s some pretty good news on the core inflation numbers,” Robert Kavcic, senior economist at the Bank of Montreal, said on BNN Bloomberg Television. “A stricter policy seems to be working.”

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Tuesday’s figures expanded September’s progress in the fight against inflation. The data will give policymakers more confidence that their previous rate hikes are working to slow the economy and inflation. Macklem and his officials held interest rates steady at 5 percent for the second straight meeting last month.

Decision on interest rates in 15 days

This is the only inflation report ahead of the Bank of Canada’s next interest rate decision on Dec. 6, when a majority of economists in a Bloomberg survey expect the bank to keep borrowing costs unchanged again. With the Canadian economy already showing signs of stagnation and inflation expected to slow further, many economists say rate increases are already in the cards for this cycle.

“Looking ahead, a weak economic backdrop should help further cap prices on these measures, and could allow the Bank of Canada to begin cutting rates as early as the second quarter of next year,” said Katherine Judge, an economist. of the Imperial Bank of Commerce of Canada, in a report to investors.

In its monetary policy report last month, the central bank said it expects the consumer price index to average about 3.5 percent through mid-2024, but cut gross domestic product growth forecasts because consumers are reducing demand. Authorities now expect to reach the 2 percent inflation target in the second half of 2025, delayed from an earlier forecast of mid-2025.

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Macklem will give a speech on the cost of high inflation to the Saint John Region Chamber of Commerce in New Brunswick on Wednesday.

In October, goods inflation slowed to 1.6 percent, driven by lower prices at the pump. Gasoline prices fell 7.8 percent from a year earlier, after rising 7.5 percent a month earlier, while grocery prices continued their trend of slower year-over-year growth, with an increase of 5.4 percent after an increase of 5.8 percent in September.

But services inflation rose to 4.6 percent, faster than the 3.9 percent pace in September and put upward pressure on consumer prices, driven largely by higher travel prices, rent and property taxes. Tourist travel prices rose 11.3 percent from a year earlier, after a 2.2 percent drop in September, with faster price growth driven largely by travel to destinations in the United States. Joined.

Canadians continued to feel the impact of rising rental costs, which rose 8.2 per cent year-over-year, compared to 7.3 per cent in September. That increase reflected an acceleration in most provinces, with the largest gains seen in Nova Scotia and Alberta, where rental prices rose 14.6 per cent and 9.9 per cent, respectively.

Property taxes and other special charges, assessed annually in October, increased 4.9 percent from a year earlier. It was the biggest increase since October 1992, and homeowners paid more in almost all provinces as municipalities required larger budgets to cover rising costs. Manitoba is the only province where property taxes decreased.

Regionally, prices rose at a slower pace than a year ago compared to September in all 10 Canadian provinces.

With the help of Erik Hertzberg and Derek Decloet.

Bloomberg.com

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