Inflation in Canada slowed to 3.1 per cent year over year in October from 3.8 per cent the month before, leading some economists to predict an interest rate cut by the Bank of Canada as early as next spring.
The deceleration was mainly driven by gas prices, which were down 7.8 per cent from last October, Statistics Canada said on Nov. 21. Prices for food also increased at a slower pace, rising 5.4 per cent from a year ago, compared with an increase of 5.8 per cent in September.
The consumer price index (CPI) reading matched Bloomberg analyst estimates.
On a monthly basis, CPI rose 0.1 per cent in October, following a 0.1 per cent decline in September, said Statistics Canada. Seasonally adjusted, CPI fell 0.1 per cent, which BMO chief economist Douglas Porter says is “the first such decline since the opening months of the pandemic in 2020.”
“Importantly, most of the major core measures are now within or very close to the Bank of Canada’s comfort zone,” said Porter, adding the report wasn’t all good news as services inflation remains “sticky.”
Services inflation quickened to 4.6 per cent year over year from 3.9 per cent in September as prices rose for travel tours, rent and property taxes and other special charges. Rents rose 8.2 per cent from last year and municipal taxes increased 4.9 per cent, those most since 1992, said TD Economics.
This latest reading places headline CPI within striking distance of the Bank of Canada’s target range of one to three per cent.
Stephen Brown of Capital Economics predicts that inflation will drop below three per cent this month as gasoline prices continue to fall and expects it to hit the Bank’s target of two per cent by the third quarter of 2024.
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