Canada’s annual inflation picked up to 2.4% in September, complicating expectations that the Bank of Canada will trim rates at next week’s meeting. StatsCan said the CPI rose on higher food prices and smaller declines in gasoline, overshooting the 2.2% consensus.
Housing-related costs were mixed: rent +4.8%, mortgage interest +3.6%, property taxes and special charges +6%, while homeowners’ replacement costs fell 1.4%.
BMO’s chief economist Doug Porter said the upside surprise makes the decision “more interesting” than markets assumed after Governor Macklem’s dovish tone and a soft Business Outlook Survey. BMO still sees the policy rate eventually drifting to 2.0% (or lower if trade weakens) but isn’t convinced October brings another cut, especially after today’s firmer core readings.
Oxford Economics’ Michael Davenport reads it differently: with underlying inflation still contained, a sluggish economy, and loosening labor markets, he still expects a 25 bp cut next week—taking the policy rate to 2.25%—though he suggests that may be the last move for a while.
The Bank of Canada sets policy next Wednesday (October 29), with its final decision of the year slated for December 10.