The latest inflation report reveals positive developments, with the October Consumer Price Index (CPI) showing a decrease in year-over-year inflation to 3.1%, attributed to a decline in gasoline prices. Notably, rent prices accelerated, particularly in Nova Scotia, Alberta, British Columbia, and Quebec. Property taxes also rose, marking the highest national increase since October 1992. Despite these challenges, the Bank of Canada’s monetary policy appears effective in curbing inflation, with expectations of rate cuts in the second quarter of the next year, given the anticipated economic slowdown.

The inflation data indicates a successful impact of tighter monetary policy, leading to a decrease in the inflation rate. Bank of Canada Governor Tiff Macklem, closely monitoring underlying price pressures, has suggested that today’s news supports the view that policy rates have peaked. The Bank’s inflation projections have been adjusted, with the expectation of hitting the 2% inflation target in the second half of 2025. Given the current economic scenario and the upcoming GDP and Labor Force Survey releases, the likelihood of rate cuts in the second quarter of the following year is emphasized.

Economists at BMO highlight a regional variation in inflation rates, noting stabilization in several provinces, though Quebec and Ontario face higher rates. The overall assessment is that there is no immediate need for further rate hikes, and the Bank could potentially consider interest rate cuts in the second quarter of the upcoming year, influenced by the encouraging signs of stabilization in a significant portion of the country.

Published by Sherry Cooper

https://sherrycooper.com/articles/canadian-inflation-dips-to-3-8-keeping-boc-on-the-sidelines-2/