Canada's annual inflation rate cooled to 2.2 per cent in October, a welcome deceleration from the 2.4 per cent recorded in September. The primary driver behind this slowdown was a significant and accelerated drop in gasoline prices, as reported by Statistics Canada on Monday.
Gasoline Leads the Decline
The data from the federal agency confirmed that gasoline prices fell at a faster pace in October than they did in the previous month. This provided substantial relief at the pumps for Canadian consumers and was the single largest factor pulling down the headline inflation figure.
However, when gasoline is stripped out of the calculation, the picture remains more persistent. The consumer price index excluding gasoline rose by 2.6 per cent, matching its pace from September.
Stubborn Core Inflation a Concern for Policymakers
Perhaps more critically for the Bank of Canada, which closely monitors underlying price pressures, core inflation measures remained elevated. The CPI-trim, which excludes extreme price movements, came in at three per cent, down slightly from 3.1 per cent in September. Similarly, the CPI-median held firm at 2.9 per cent, also down from 3.1 per cent the prior month.
Another key gauge, the consumer price index excluding the volatile food and energy sectors, actually accelerated. It rose by 2.7 per cent in October, up from 2.4 per cent in September, indicating that price pressures are still broadly embedded in the economy.
Inflation Meets Economist Expectations
The October headline inflation number of 2.2 per cent aligned with the expectations of economists, who had anticipated the dip due to the known decline in energy costs. While the overall trend is moving in the right direction, the stickiness of core inflation suggests the Bank of Canada will continue to proceed with caution regarding any potential future interest rate adjustments.
