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Canada Inflation October 2023

Canada: Inflation falls to lowest level since June in October

Inflation came in at 3.1% in October, which was down from September’s 3.8%, below market expectations and only marginally above the Central Bank’s 1.0%–3.0% target range. October’s reading represented the lowest inflation rate since June. In October, notable price rises for food and housing were partly offset by lower gasoline prices.

Accordingly, the trend pointed down, with annual average inflation coming in at 4.4% in October (September: 4.7%). Meanwhile, core inflation edged down to 2.7% in October, from the previous month’s 2.8%.

Finally, consumer prices rose 0.06% from the previous month in October, swinging from the 0.13% drop recorded in September.

October’s inflation reading cements the chances of the Central Bank leaving interest rates unchanged at the last meeting of the year on 6 December; shortly after the inflation data was published, the Central Bank chief stated that interest rates “may now be restrictive enough to get us back to price stability.”

On monetary policy implications, Desjardins’ Randall Bartlett said:

“While the October inflation print is no doubt music to the Bank of Canada’s ears, this is paired with real GDP growth that is tracking only slightly better than flat in Q3. Together with a falling vacancy rate and gradually rising unemployment rate, our analysis suggests excess demand is slowly being brought to heel. As such, we think the Bank of Canada is likely to remain on hold for the foreseeable future, with its next move expected to be a rate cut around the middle of 2024.”

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