Inflation in Canada slowed to 3.1% in October, just above the central bank’s target range. Here is what economists say
Inflation in Canada slowed to 3.1 per cent year over year in October from 3.8 per cent the month before, leading some economists to predict an interest rate cut by the Bank of Canada as early as next spring.
The deceleration was mainly driven by gas prices, which were down 7.8 per cent from last October, Statistics Canada said on Nov. 21. Prices for food also increased at a slower pace, rising 5.4 per cent from a year ago, compared with an increase of 5.8 per cent in September.
On a monthly basis, CPI rose 0.1 per cent in October, following a 0.1 per cent decline in September, said Statistics Canada. Seasonally adjusted, CPI fell 0.1 per cent, which BMO chief economist Douglas Porter says is “the first such decline since the opening months of the pandemic in 2020.”
“Importantly, most of the major core measures are now within or very close to the Bank of Canada’s comfort zone,” said Porter, adding the report wasn’t all good news as services inflation remains “sticky.”
Services inflation quickened to 4.6 per cent year over year from 3.9 per cent in September as prices rose for travel tours, rent and property taxes and other special charges. Rents rose 8.2 per cent from last year and municipal taxes increased 4.9 per cent, those most since 1992, said TD Economics.
This latest reading places headline CPI within striking distance of the Bank of Canada’s target range of one to three per cent.
Stephen Brown of Capital Economics predicts that inflation will drop below three per cent this month as gasoline prices continue to fall and expects it to hit the Bank’s target of two per cent by the third quarter of 2024.
Here’s what economists say about the inflation numbers, what it means for the Bank of Canada and where interest rates go from here.
“While no one expected inflation to go quietly into the night, this is a generally good news step in the right direction.
“Overall, today’s result drives home the point that there is no need for further BoC tightening, especially with the economy already struggling to grow at all and underlying inflation calming. However, before the Bank can even begin seriously considering rate relief, we’ll need to see more evidence that services inflation is also moderating — that could be at least another six months down the road.”
“Looking ahead, price pressures will continue abating. Consumer spending in aggregate has plateaued, even with immigration. On a per capita basis, consumer spending has actually dropped. Households who get hit with higher mortgage payments find themselves cutting back on discretionary spending. And this is just the beginning: more mortgage terms are up for renewal at higher rates in the upcoming months.
“The CPI report is the latest sign of a cooling economy that should make the Bank of Canada feel comfortable keeping the policy rate unchanged at the December announcement. At this point, the Bank can sit back and let the forces of monetary policy work its way through the economy, keeping inflation near three per cent.”
“Overall, although the rise in services prices in this morning’s report is not what the Bank would have liked to see, the overall trend in price pressures remains downward as signs of an economic slowdown persist.”
“There was good news all round in the October CPI report, with the overall CPI falling in month-on-month seasonally adjusted terms for the first time since May 2020, and the average three-month annualized change in CPI-trim and CPI-median falling to three per cent, the lowest since early 2021. With gasoline prices falling further this month and the economy already seemingly in recession, we expect headline inflation to fall to two per cent by the third quarter of next year.”
“In conjunction with data showing slack building within the labour market and growth data suggesting the economy is in a shallow recession, today’s constructive inflation report has completely undermined the BoC’s hawkish bias. This is yet another confirmatory point for our view that the BoC, having led the Fed during the hiking cycle, will once again be the pace setter in the 2024 easing cycle, with a cut likely as early as April.”
Details in today’s inflation report showed further moderation in domestic price pressures in Canada, extending a downside surprise in price growth in September. Not only were the readings themselves lower among many components, the scope of inflation has also continued to narrow.
“Ongoing signs of deterioration in consumer spending and labour market conditions support our outlook for inflation to keep moderating in the quarters ahead. We continue to expect the BoC is done with rate hikes, and for them to cautiously pivot to cuts over the latter half of 2024.”
“The continued deceleration in headline and underlying measures of inflation practically eliminated the probability of another rate increase. Nevertheless, we believe it may still be too early for the BoC to officially declare victory and signal that it is no longer considering a rate hike, especially considering the broadness of inflation and continued strong wage growth. Looking ahead, the BoC is unlikely to contemplate rate cuts until inflation has been brought sustainably below three per cent. This is unlikely to happen until the spring.”
“It is encouraging to see another leg down in CPI inflation in October, but the Bank of Canada will likely need to see further progress on core inflation before it feels confident that inflation is headed back to the two per cent target. There is little doubt that Canada’s economy has cooled in recent months, but the chill in inflation that should follow is proving slow to show up. We expect weaker demand in the economy will ultimately dampen price pressures, but given tightness in the labour market, it will take time.”
“October’s rapid downshift in inflation adds to a drumbeat of weaker economic data that should keep the Bank of Canada on the sideline at its Dec. 6 meeting. Economic data has stagnated. Gross domestic product is trending flat, with per capita GDP in outright decline, and a cooling labour market, albeit with more robust wage growth. Conditions are expected to worsen going forward as past Bank of Canada hikes continue to impact activity and mortgage renewals through 2024 further lead consumers and businesses to retrench. We expect the Bank of Canada to cut rates late in the second quarter of 2024 provided inflation continues to ease and wage growth abates.”
EDMONTON – RCMP say a second suspect has been arrested in the killing of an Alberta county worker.
Mounties say 28-year-old Elijah Strawberry was taken into custody Friday at a house on O’Chiese First Nation.
Colin Hough, a worker with Rocky View County, was shot and killed while on the job on a rural road east of Calgary on Aug. 6.
Another man who worked for Fortis Alberta was shot and wounded, and RCMP said the suspects fled in a Rocky View County work truck.
Police later arrested Arthur Wayne Penner, 35, and charged him with first-degree murder and attempted murder, and a warrant was issued for Strawberry’s arrest.
RCMP also said there was a $10,000 reward for information leading to the arrest of Strawberry, describing him as armed and dangerous.
Chief Supt. Roberta McKale, told a news conference in Edmonton that officers had received tips and information over the last few weeks.
“I don’t know of many members that when were stopped, fuelling up our vehicles, we weren’t keeping an eye out, looking for him,” she said.
But officers had been investigating other cases when they found Strawberry.
“Our investigators were in O’Chiese First Nation at a residence on another matter and the major crimes unit was there working another file and ended up locating him hiding in the residence,” McKale said.
While an investigation is still underway, RCMP say they’re confident both suspects in the case are in police custody.
This report by The Canadian Press was first published Sept. 13, 2024.
The Canadian Press. All rights reserved.
RICHMOND, B.C. – The Integrated Homicide Investigation Team says the 26-year-old son of a man found dead on British Columbia’s Sunshine Coast has been charged with his murder.
Police say 58-year-old Henry Doyle was found badly injured on a forest service road in Egmont last September and died of his injuries.
The homicide team took over when the BC Coroners Service said the man’s death was suspicious.
It says in a statement that the BC Prosecution Service has approved one count of first-degree murder against the man’s son, Jackson Doyle.
Police say the accused will remain in custody until at least his next court appearance.
The homicide team says investigators remained committed to solving the case with the help of the community of Egmont, the RCMP on the Sunshine Coast and in Richmond, and the Vancouver Police Department.
This report by The Canadian Press was first published Sept. 13, 2024.
The Canadian Press. All rights reserved.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, have broken off without an agreement following 15 hours of talks.
Joe McCann, president of Amalgamated Transit Union Local 1724, says they stayed at the bargaining table with help from a mediator until 2 a.m. Friday and made “some progress.”
However, he says the union negotiators didn’t get an offer that they could recommend to the membership.
McCann says that in some ways they are close to an agreement, but in other areas they are “miles apart.”
About 600 employees of the door-to-door transit service for people who can’t navigate the conventional transit system have been on strike since last week, pausing service for all but essential medical trips.
McCann asks HandyDART users to be “patient,” since they are trying to get not only a fair contract for workers but also a better service for customers.
He says it’s unclear when the talks will resume, but he hopes next week at the latest.
The employer, Transdev, didn’t reply to an interview request before publication.
This report by The Canadian Press was first published Sept. 13, 2024.
The Canadian Press. All rights reserved.
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