Canada’s inflation rate was two per cent year-on-year in Oct. 7, the country’s statistics agency said Tuesday, a figure in line with the central bank’s targets and likely to set up another interest rate cut.
Data from Statistics Canada showed inflation had nudged higher compared to September, when annual inflation was 1.6 per cent.
The October data, which was consistent with analyst expectations, showed grocery prices were up 2.7 per cent and shelter costs had risen 4.8 per cent year-on-year.
Despite the uptick from the September figures, analysts remained confident the Bank of Canada would press on with rate cuts when its governors meet on Dec. 11.
Canada had held its benchmark rate steady for almost a year at 5.0 per cent, the highest level in two decades, before initiating cuts in early June.
It was the first G7 country to begin trimming rates after a protracted period of inflation triggered largely by the pandemic.
At its October meeting, the bank opted for an aggressive half-point rate cut to 3.75 per cent, saying data showed Canada’s battle against inflation had worked and the economy was cooling.
Following the release of Tuesday’s data, Oxford Economics Canada economist Michael Davenport said he expects another half-point cut.
“With inflation on target, a weak economy and a loose labour market, we still expect the bank will cut rates 50bps again in December,” he said in a statement.
Royce Mendes, managing director at Desjardins, said a quarter-point cut was more likely, amid signs there is “a tad more stickiness in inflation than expected.”
Last month, Bank of Canada governor Tiff Macklem said more rate cuts were likely if the economy evolved in line with expectations, stressing the goal of “low, stable inflation.”
Though inflation has steadied, Canadians, like many people across the globe, were weighed down by rising costs of goods and borrowing — economic burdens that in part have driven frustration with the governing Liberal party.
