Inflation is still showing no signs of significant moderation
The Bank of Canada’s outsized rate hikes still appear to be the right path considering the weaker economic backdrop, but Benjamin Reitzes of BMO Economics stressed that this is a precarious approach for the institution to take.
“Inflation is still red-hot and has shown no real signs of cooling yet,” Reitzes said. “That’s the fine balance the BoC is trying to achieve: threading the needle of taming inflation while not putting too much pressure on the economy.”
The bank’s October 26 announcement “puts a bit more emphasis on the economy,” Reitzes added. “Hopefully that doesn’t come back to haunt [the BoC] in 2023 if inflation remains stickier than expected.”
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A separate analysis by economist Sherry Cooper noted that at present, there is no evidence of moderation in Canada’s core inflation rate. This is despite the annual rate ticking down from 7% in August to 6.9% in September.
“Price pressures might have peaked, but [the latest numbers] will not be welcome news for the Bank of Canada,” Cooper said. “The average of the bank’s favourite measure of core inflation remains stuck at 5.3%.”
