CPI is ticking slowly back towards the BoC's target
Canada’s inflation rate fell to 3.1% in October, still above the Bank of Canada’s target rate but down notably from its September reading of 3.8%.
That slowdown was caused mainly by plummeting gas prices, with the cost of fuel at the pump falling by 7.8% compared with the same time last year. When gas price fluctuations were taken out of the equation, the consumer price index (CPI) grew by 3.6% last month, Statistics Canada said, down slightly from 3.7% in September.
Unsurprisingly, skyrocketing mortgage interest and rent costs continue to contribute strongly to year-over-year price growth, while grocery prices also saw another big yearly increase.
Rent costs rose at a faster clip in October than the prior month, by 8.2% compared with 7.3% in September, with Nova Scotia seeing a double-digit increase and Alberta, British Columbia, and Quebec all recording yearly rent increases of just under 10%.
Prices for services were also higher in October, StatCan said, rising by 4.6% as travel tours, property taxes and other special charges posted a noted uptick.
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What does the latest inflation news mean for the Bank of Canada?
As inflation surged in 2022, the Bank of Canada introduced a spate of interest-rate hikes aimed at tamping down annual price growth. The inflation rate hit a 39-year high of 8.1% in June of that year, but has ticked down substantially since then.
Although inflation has yet to fall in line with the central bank’s 2% target, it has hit pause on further rate hikes in its last two announcements in a seeming indication that it believes the economy is slowing enough to justify no further action.
Royal Bank of Canada (RBC) economist Claire Fan said in the bank’s response to October’s inflation figures that there appeared scant prospect of the Bank of Canada having to change tack and begin raising rates again.
“Ongoing signs of deterioration in consumer spending and labour market conditions support our outlook for inflation to keep moderating in the quarters ahead,” Fan wrote. “We continue to expect the BoC is done with rate hikes, and for them to cautiously pivot to cuts over the latter half of 2024.”
The Bank is scheduled to make its final interest rate announcement of the year on December 6, with StatCan to release CPI data for this month on December 19.
