• Headline CPI ticked lower to 1.9% year-over-year
  • Energy prices fell as cheaper gasoline offset an increase in natural gas prices
  • Core inflation remains steady at 2%

Headline inflation crept lower over the last three months as consumers got a break on gasoline prices over the summer. Meanwhile, underlying inflation continues to hum along at 2%, making the Bank of Canada the envy of its global peers. With the Fed set to lower borrowing costs again today (and potentially leave the door open to another cut) the BoC might just end the year with the highest policy rate in the G7. Inflation would be a key reason for that. For consumers, the combination of steady inflation and accelerating wage growth is good news. Of course, other pressures like housing affordability aren’t captured well in the CPI, so not all households will be feeling an increase in purchasing power.

Geopolitical events have been in focus this week and could have implications for CPI in the months ahead. An attack on a major oil process facility in Saudi Arabia over the weekend (which took a good chunk of the country’s production offline) drove a sharp increase in global oil prices on Monday. While a larger risk premium is likely to be embedded in oil prices going forward, about half of the immediate increase in crude prices has now been retraced. The situation remains fluid, but for now it looks like consumers aren’t staring down the sharp increase in gasoline prices that was feared earlier this week.


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