OTTAWA –
Canada’s annual inflation rate accelerated more than expected to 2.0 per cent in October as gas prices fell less than the previous month, data showed on Tuesday, likely diluting chances of another large rate cut in December.
Analysts polled by Reuters had forecast that the inflation rate would speed up to 1.9 per cent from 1.6 per cent in September. In August, the annual rate was 2 per cent.
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On a monthly basis, the consumer price index rose by 0.4 per cent after two consecutive monthly declines, Statistics Canada data showed. The monthly gain also beat market expectations of a 0.3 per cent increase.
While it was the first pick up in the annual inflation rate since June, the rise was broadly in line with central bank forecast for it rise back to its two per cent after lower energy prices fueled a quicker than expected slowdown in headline inflation in recent months.
In October, Statistics Canada said a smaller four per cent annual drop in gasoline prices compared with September’s 10.7 per cent decrease led to the acceleration. Excluding gasoline, the inflation rate remained at 2.2 per cent for the third straight month.
This was last inflation data to be released ahead of the Bank of Canada’s interest rate announcement on Dec. 11, when money markets see a roughly 60 per cent chance of at least a 25 basis point cut.
The bank has lower its policy rate by 125 basis points over its last four policy setting meetings, including a 50 bp cut in October, when Governor Tiff Macklem said there would be further easing if the economy evolved roughly in line with forecasts.
The bank’s preferred measures of core inflation, CPI-median and CPI-trim, also edged up. CPI-median – or the value at the middle of the set of price changes in a month – increased to 2.5 per cent from 2.3 per cent in September, while CPI-trim – which excludes the most extreme price changes – rose to 2.6 per cent from 2.4 per cent.
Price increases of store-bought food also accelerated to 2.7 per cent in October from 2.4 per cent in September, Statscan said, noting that this was the third consecutive month where grocery price rises outpaced headline inflation.
Services price inflation rate decelerated to 3.6 per cent, the slowest annual pace since January 2022, while goods prices rose by 0.1 per cent after a one per cent decline in September.
Reporting by Ismail Shakil in Ottawa; Editing by Dale Smith