• The consumer price index rose 1.9% year-on-year in October, unchanged from September and on par with expectations. Month-on-month, prices rose 0.3% in October (seasonally adjusted), following a 0.1% decline in September.
  • All subcategories were up or flat on the month (seasonally adjusted), led by recreation and education prices (up 1.6%), shelter prices (up 0.6%), and transportation (up 0.4%) in October. Clothing prices were flat on the month, as were health and personal care.
  • Only one of the Bank of Canada’s core measures edged higher in October: CPI-median rose to 2.2% (from a revised 2.1% in September). CPI-common and CPI-trim were unchanged at 1.9% and 2.1% respectively.

Key Implications

  • This was a pretty bland report, no matter how you slice it. Core inflation is well anchored at around the 2.0% mark and with few idiosyncratic factors to report, the headline is just a hair below. Base effects (soft growth a year ago) will likely lead the headline number to push modestly higher toward the end of the year, but nothing to raise any alarm bells
  • More than any immediate concerns about its inflation target, the Bank of Canada’s future policy is likely to be based on its assessment of the risks to the economic outlook. These are balanced between concerns around the detrimental impact of global economic weakness and trade uncertainty and continued evidence of a resilient labor market, rebounding housing demand and accelerating household credit growth. We expect the central bank to ere on the side of supporting economic growth and cut the overnight rate in the first half of 2020.

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