The Consumer Price Index (CPI) increased by 3.1% in October compared to 3.8% in September. This continued improvement is largely driven by falling year-over-year gasoline prices. Excluding gasoline, the CPI rose 3.6% in October following a 3.7% increase in September.
Mortgage interest costs, food purchased from stores, and rent continued to contribute to inflation significantly. Excluding food and energy, inflation dropped to 2.7% in October. The Bank of Canada closely monitors the trim and median core rates, which have also eased.
Based on Bloomberg calculations, a three-month moving average of underlying price pressures - closely monitored by the Bank - dropped to an annualized pace from 3.67% to 2.96% in one month.
This recent CPI report shows that tighter monetary policy is effective in reducing the inflation rate. The Bank forecasted it would reach its 2% target sometime after the 2nd quarter of 2025.
According to observations made by economists at BMO, most of the country is showing signs of stability. However, the largest provinces (Quebec and Ontario) have the fastest inflation rates - 4.2% and 3.3% respectively.
Home sales have dropped 5.6% month-over-month in October. This was the fourth consecutive monthly decline and the steepest deceleration since June 2022. Currently, unaffordable housing and the slowing labour market have dampened activity in the real estate market. According to Dr. Sherry Cooper, the spring season will be more promising as long as the Bank continues its rate pause.
The Bank of Canada will meet on December 6th for the next interest rate announcement. Given the recent data released, economists are expecting the Bank to hold the policy rate. Dr. Sherry Cooper predicts that the Bank will most likely cut interest rates in the second half of 2024. Stay tuned for more updates!
Comments