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Canadian CPI Inched up in October

  • Headline CPI grew 0.7% year-over-year in October
  • Bank of Canada’s preferred core measures ticked up but remained below target
  • Weak economy still keeping price growth in check

Headline consumer price inflation growth rose to 0.7% in October, up from 0.5% in September. Growth in food prices ticked up to 2.3% after trending lower in prior months. Energy price growth ticked lower again to -6% from year-ago, which is still well above the trough of -23.7% back in April. Outside those components, prices grew a stable 0.8%, matching September’s reading. Price growth for the shelter component continued accelerated from higher home replacement costs, offsetting further slowing in mortgage interest costs. And much like the rest of post-COVID 2020, significantly lower demand for hospitality and travel services continued limit price growth for transportation and recreation components. Services inflation as a whole remained on the soft side at 1.2% from a year ago, a bit lower than September.

The Bank of Canada’s preferred core measures (“trim”, “median”, and “common”) that control for the volatility in individual price components ticked up a tenth in October, averaging at 1.8% year over year. Resilient household incomes (supported by unprecedented government supports for those losing work) have helped prop up consumer demand, limiting the price impact from a weaker labour market throughout the pandemic. But the economy is still running significantly below long-run capacity limits, with additional near-term downside risks coming from more stringent containment measures that could yet be imposed should the virus spread worsen. That should all keep a lid on inflation in the near-term and leaves monetary policymakers still free to focus on supporting the economy by keeping interest rates low.

RBC Financial Group
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.

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