'Next move likely an interest-rate cut' — What economists say about the latest inflation numbers

financialpost.com:

Canada’s inflation rate cooled more than expected in September to an annual pace of 3.8 per cent in a broad-based easing that economists say should give the Bank of Canada reason to hold interest rates when it meets next week.

The reading released by Statistics Canada on Oct. 17, was the first slowdown in the consumer price index since prices reaccelerated in July and August and came in lower than economists’ estimates of four per cent.

Inflation slowed in a number of categories including cell services, cleaning products, furniture/textiles and recreational vehicles, BMO economist Benjamin Reitzes said in a note.

Food prices also showed signs of easing, rising 5.8 per cent year over year compared with 6.9 per cent in August.

CPI is still riding well above the Bank of Canada’s two per cent inflation target, but today’s numbers showed that higher interest rates are starting to do their job, said Andrew Grantham ofCIBC Economics.

“There were signs within today’s release that the weakening of domestic demand is now starting to impact pricing in some areas and should continue to do so moving forward,” Grantham said.

Here’s what the economists are saying about the latest inflation numbers and what they mean for the Bank of Canada and interest rates.

“With the Business Outlook Survey pointing to ongoing struggles for the economy (which saw GDP flat-line in the six months to July), and inflation coming in below expected, look for expectations to solidify around the BoC holding policy steady next week. The level of inflation remains much too high for comfort, but the trend is the BoC’s friend here. Given that inflation is the most lagging of indicators, and the economy is clearly weakening, we’re likely to see ongoing