In October, Canada experienced a decrease in its annual inflation rate, which fell to 2.2%. This decline was primarily attributed to a significant drop in gas prices, according to Statistics Canada. Gas prices plummeted by 9.4% during the month, building on a 4.1% decline seen in September. This trend occurred as drivers opted for less expensive winter gas blends and global crude prices decreased due to ongoing concerns about an oversupply in the market.
Impact of Gas Prices on Inflation
Excluding gasoline, the inflation rate registered at 2.6%, consistent with the figures from September. BMO’s chief economist, Douglas Porter, described the details of the inflation report as somewhat disappointing. He noted that the decline in gas and food prices was a significant contributor to the moderation in inflation, even as many underlying prices increased.
Future Inflation Expectations
The Bank of Canada has indicated its expectation for inflation to remain close to its 2% target in the upcoming months. Governor Tiff Macklem suggested that the bank would likely maintain current interest rates if inflation continues to align with its projections.
Core Inflation Measures
The Bank of Canada’s preferred core inflation measures, which eliminate volatile sectors and one-time tax impacts from the overall numbers, have been hovering around 3%. Some of these core indicators saw a moderation in October. Furthermore, grocery prices grew at a slower rate last month, contributing to the overall decline in inflation. However, food prices remain high, outpacing overall inflation for the past nine months.
Food Prices and Other Influences
- Processed foods showed slower price growth.
- Fresh vegetable prices also increased at a slower pace.
- Higher costs were reported for fresh or frozen chicken.
The reduction in gas and grocery prices was partially balanced by rising costs in other areas. Cellphone plan prices, along with home and auto insurance premiums, increased in October. Alberta saw the most significant price hikes for both insurance categories.
In conclusion, the news surrounding inflation is not entirely positive. Persistent increases in insurance costs and a recent rise in cellphone charges have raised concerns. Porter commented that these developments could indicate the Bank of Canada may not make any cuts to interest rates during its upcoming meetings.
