Emmanuel Ochayi
Inflation Hits 2%, Exceeding Forecasts
Canada’s inflation rate increased to 2% in October, up from 1.6% in September, according to Statistics Canada. This marks the first acceleration in five months, surprising economists who had predicted a rise of 1.9%. On a monthly basis, the Consumer Price Index (CPI) climbed by 0.4%, slightly higher than expectations of 0.3%.
“October’s data is a wake-up call,” said Charles St-Arnaud, chief economist at Alberta Central. “Inflation isn’t easing as quickly as anticipated, and that complicates the Bank of Canada’s plans.”
Join our WhatsApp ChannelCore Inflation Signals Continued Pressure
Core inflation measures, which exclude volatile items like gas prices, also rose. The central bank’s preferred indicators averaged a 2.55% yearly pace in October, up from 2.35% in September. A three-month moving average of these metrics surged to an annualised 2.8%, reinforcing concerns about underlying price pressures.
Economists are closely watching these figures. Benjamin Reitzes, a strategist at the Bank of Montreal, remarked, “This report adds complexity to the inflation picture. It reduces the likelihood of another 50 basis-point cut in December.”
Rate Cuts Now in Question
The Bank of Canada’s aggressive rate cuts in recent months have been aimed at spurring economic growth. However, October’s inflation data could lead policymakers to reconsider their approach.
When asked about the likelihood of further rate reductions, Katherine Judge, an economist at CIBC, stated, “While the 50 basis-point cut is still on the table, this data complicates things. The final decision will hinge on upcoming GDP and employment figures.”
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What’s Driving Inflation?
The recent uptick in inflation is partly attributed to rising municipal property taxes, which saw the largest increase since 1992. Gasoline prices also played a role, though excluding gas, the CPI rose 2.2%, consistent with rates seen in August and September.
Shelter costs showed signs of easing, growing by 4.8% compared to 5% in September. Despite this, the overall inflation rate accelerated across all 10 provinces.
Market Reaction and Next Steps
The inflation report immediately impacted financial markets. Traders reduced their expectations for another large rate cut, while the Canadian dollar gained 0.3% following the news.
Experts emphasise that the Bank of Canada’s next rate decision, scheduled for December 11, will be critical. “We’ll need to see poor GDP and employment reports to justify another aggressive cut,” Reitzes added.
With inflation rising faster than expected, the Bank of Canada faces a difficult decision. The balance between controlling inflation and supporting economic growth is becoming increasingly delicate. As St-Arnaud concluded, “Policymakers must weigh these inflationary pressures carefully to avoid oversteering the economy.”
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
