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Canada's inflation rate was back on the rise in October, climbing to an annualized pace of 2.0% –– up from 1.6% in September.
The rise was mainly driven by higher gas prices, property taxes, and the effects of previous years' data.
While economists had expected some increase, the bigger-than-expected jump in the Bank of Canada's preferred measures of core inflation ––CPI-median at 2.5% and CPI-trim at 2.6% –– represented a "step back" for the central bank, according to CIBC’s Katherine Judge.
"Although this report will be a disappointment for the Bank of Canada, it follows a string of reports that showed more progress than expected," she wrote.
The good news? Mortgage interest costs and rent inflation continued to ease, with both readings down from September and their previous highs. Mortgage interest costs eased to +14.7% in October (from +16.7%), and rent inflation dropped to +7.3% (from +8.2%).
What this means for next month’s rate decision
TD economist James Orlando said today’s readings highlight how the Bank of Canda's goal of stabilizing inflation "won't be a smooth path."
"The BoC is likely to view today's data release as a minor setback," Orlando wrote. "Inflation had become a background worry, and while it isn't raising any red flags yet, today's data is a reminder that getting price growth to settle at 2% will take time."
While today's report isn’t expected to change expectations of another Bank of Canada rate cut next month, it may "take some more steam out of the call for another 50 bp rate cut," noted BMO chief economist Douglas Porter.
"We have been in the 25 bp camp from the start and this report only reinforces that expectation, along with evidence that housing is stirring, the Fed will turn more cautious, and a limping loonie," he continued.
With the December 11 Bank of Canada rate decision approaching, the economy remains volatile, leaving many borrowers uncertain about future interest rates.
If you're feeling the strain of rising costs or have concerns about your mortgage renewal, now’s a great time to connect. I can help you navigate the impact of inflation on your finances and guide you through upcoming decisions. |