Canada's inflation rate rose to 2 per cent in October

Canada’s inflation rate rose to two per cent in October, up from 1.6 per cent in September, Statistics Canada said.

The annual rate of inflation, which fell below the Bank of Canada’s target of two per cent in September, beat the analyst expectation of 1.9 per cent slightly.

Price hikes at the grocery store rose at a faster pace in October, at 2.7 per cent, compared to 2.4 per cent year-over-year in September.

Finance Minister Chrystia Freeland said Tuesday’s inflation numbers meant “good news” for Canadians.

“Inflation was two per cent in October. That means for the past 10 months, inflation in Canada has been within the Bank of Canada’s target range,” she said, referring to the goal of keeping it between one and three per cent.

Freeland added, “Wages have outpaced inflation in Canada for 21 months in a row. And 1.4 million people more are working in Canada today compared to before COVID.”

The spike in grocery prices was led by the 7.3 per cent increase in the prices of fresh vegetables and 7.6 per cent increase for preserved fruit and fruit preparations.

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There was further cooling in shelter prices, with shelter price rising at 4.8 per cent in October instead of five per cent in September.

Rent grew at a slower pace in Canada in October at 7.3 per cent year-over-year, compared to 8.2 per cent in September. Mortgage price growth eased as well, growing at 14.7 per cent annually in October, instead of 16.7 per cent in September.

RBC economist Abbey Xu said that despite the slight uptick in inflation, the rate remains within the Bank of Canada’s target rate of one to three per cent.

“Headline price growth held right at the mid-point of the BoC’s target range,” Xu said.

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Robert Kavcic, senior economist at BMO Capital Markets, told Global News that the rate of inflation was “a touch higher than expected” but still fell within range.

“The core inflation measures were quite firm. Most core inflation readings accelerated in October, and there’s been somewhat of a pick-up in recent months,” he said.

“Ups and downs” in the inflation rate were to be expected, Xu said in a note on Tuesday morning.

“With continuing softness in labor markets, evidenced by declining job openings and rising unemployment, we still expect price growth will drift broadly lower. The BoC is data dependent, and will see another labour market report before the next interest rate decision in December.”

Xu said Canadians could expect a rate cut by the end of the year.

“Our base-case assumes an additional 50 basis point cut to the overnight rate by the Bank of Canada in December.”

Kavcic predicted a slightly lower rate cut in December. He said the Bank of Canada was likely to cut interest rates by 25 basis points, not 50.