Canada: Inflation falls to lowest level since February 2021 in September
Latest reading: Inflation eased to 1.6% in September, below August’s 2.0% and well below market expectations. September’s figure marked the weakest inflation rate since February 2021, and undershot the Central Bank’s 2.0% target. The decline was broad-based, with reduced price pressures recorded for housing, transportation, and food.
In addition, the trend pointed down mildly, with annual average inflation coming in at 2.7% in September (August: 2.9%). Meanwhile, core inflation ticked up to 1.6% in September from August’s 1.5%.
Finally, consumer prices dropped 0.43% over the previous month in September, coming in below the 0.19% drop logged in August. September’s result marked the weakest reading since December 2022.
Panelist insight: On inflation, TD Economics’ James Orlando said:
“Inflation risks have eroded over the last few months. Below the surface, this trend looks to continue with housing costs finally starting to subside, with inflation excluding shelter running at a paltry 0.4% y/y. All in, the inflation outlook is looking a bit softer than we expected in our recently published forecast.”
On monetary policy, Desjardins’ Randall Bartlett said:
“We think the BoC is likely to cut the policy rate by 50 basis points at its October meeting. After that, the Bank will probably return to its gradual pace of 25 basis point rate cuts, keeping the option open to accelerate the pace of cuts if the economy slows more quickly.”