Falling pump and food prices cool inflation, but sticky costs keep rate cut hopes on ice for now
Gasoline prices plunged and grocery bills finally eased—pulling Canada’s inflation rate to its lowest level in over a year and setting the stage for a pivotal Bank of Canada decision.
“There are a lot of conflicting signals and there’s a lot of messiness in underlying inflation,” said BMO chief economist Doug Porter, as the Consumer Price Index (CPI) rose just 2.2 percent year over year in October, down from 2.4 percent in September, according to Statistics Canada.
The most dramatic driver was at the pump: gasoline prices fell 9.4 percent compared to last year, a steeper drop than September’s 4.1 percent decrease.
Statistics Canada attributed this to a 4.8 percent monthly decline, citing “a switch to cheaper winter blends, as well as lower crude oil prices amid continued concerns of oversupply.”
Grocery prices, a persistent concern for Canadian households and investors, rose 3.4 percent annually in October, cooling from a 4.0 percent increase in September.
“Some of that relief was likely tied to the ‘unwinding’ of price pressures from tariffs put on perishable US goods like Florida orange juice earlier this year,” Porter said, after Ottawa removed most retaliatory tariffs in September.
On a monthly basis, grocery prices dropped 0.6 percent—the largest decline since September 2020, as reported by BNN Bloomberg.
While food and energy costs eased, other components kept inflation sticky.
Prices for cellular services jumped 7.7 percent year over year in October—the first annual increase since April 2023—after several wireless providers raised plan prices, according to Statistics Canada.
Insurance costs also continued to climb, with homeowners’ home and mortgage insurance up 6.8 percent and passenger vehicle insurance premiums rising 7.3 percent.
Alberta posted the steepest increases in both categories.
Shelter costs showed a mixed picture.
Mortgage interest costs increased at an annual pace of 2.9 percent, dropping below the 3 percent mark for the first time in more than three years, as reported by Reuters.
However, rent inflation accelerated above 5 percent for the second consecutive month.
Core inflation measures, closely watched by the Bank of Canada, sent mixed signals.
The CPI-median slipped to 2.9 percent in October from 3.1 percent in September, while the CPI-trim edged down to 3.0 percent. Excluding food and energy, the annual inflation rate rose to 2.7 percent.
“It would take a longer period of easing price pressures, combined with indications of economic growth deteriorating again, to bring the Bank of Canada back off the sidelines,” said CIBC senior economist Andrew Grantham.
With the central bank’s benchmark rate at 2.25 percent after back-to-back cuts, most economists expect policymakers to hold steady at their next meeting, barring any major surprises.
Porter explained that, from the bank’s perspective, current conditions may be “a little bit hot for them to be fully comfortable.” He added, “So the main point here is, I think the bank is not going to change interest rates at their next meeting.”
