Statistics Canada will release inflation numbers for October on Tuesday and analysts say the rate will likely be slightly higher than the previous month, thanks to higher prices at the gasoline pump.
A consensus of economists surveyed by Bloomberg expects the data to show the annual rate of inflation — as measured by the Consumer Price Index — rose to 1.9 per cent in October from 1.6 per cent the previous month.
Still, many economists say that’s unlikely to deter the Bank of Canada from cutting interest rates at its next meeting on Dec. 11. There’s still plenty of evidence the Canadian economy is sputtering, said CIBC chief economist Avery Shenfeld.
“Inflation measures look even more subdued when excluding shelter, which will give the BoC plenty of reason to trim interest rates by another 50 basis points in December,” Shenfeld wrote in a research note ahead of the release.
The Bank of Canada has already cut interest rates four times this year, bringing its key overnight interest rate to 3.75 per cent from a peak of five per cent.
The Bank of Canada raised interest rates 10 times between March 2022 and last summer in a bid to wrestle inflation down to its two per cent target. Inflation peaked at 8.1 per cent in June 2022 as the Canadian economy opened back up from COVID-related restrictions. In September, Canada’s annual rate of inflation fell to 1.6 per cent, from two per cent the previous month.
The theory is that by making it more expensive to borrow money, consumers and businesses will spend less, driving down prices and slowing the economy.
Now, as the economy slows and inflation has been heading mostly downward, the Bank is taking the reverse approach, trying to stimulate growth by cutting rates.
More to come
