Inflation stabilizes at 6.9%

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The consumer price index, which the Bank of Canada uses to guide interest rate policy, rose 6.9% year-on-year in October, matching the previous month’s year-on-year rise, Statistics Canada reported Nov. 16. . In addition, natural gas costs increased at a moderate pace, offsetting higher gasoline prices. On the surface, the numbers are positive, as many on Bay Street assumed inflation accelerated in October.

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Here’s what you should know:

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price plateau

Inflation in Canada is starting to look like it has peaked. Annual inflation he spiked to 8.1% in June and has slowed since. His 17.8% surge in petrol prices from October 2021 (compared to his 13.2% rise in September) is notable. Living expenses for the past year. It suggests that higher interest rates are starting to take the heat out of an economy that central banks deemed too hot for their own good.

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Indeed, the cost of nearly 80% of the 700 goods and services tracked by Statistics Canada increased by more than 3% year-on-year in October, and the prices of more than 60% of these items increased by 5% each year. rose above. But even those percentages appear to have peaked, with inflation stemming from skyrocketing commodity prices and supply bottlenecks in 2021, according to Alberta Central chief economist Charles St. Arnault. It suggests that the pressure is no longer spreading.

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In a report to clients, St-Arnault said the monthly change was also slowing, suggesting that “inflationary pressures are faltering and weakening”.

food centered

Food prices rose 10.1% year-on-year, compared to 10.3% in September. This figure is still too high given that year-on-year wage growth continues to keep up with inflation. But the numbers offer hope that the impact of the 2021 crop failure and food supply disruptions caused by Russia’s invasion of Ukraine are starting to fade. Prices for meat, fresh fruit and fresh vegetables rose at a moderate pace, Statistics Canada said.

Yet food has replaced fuel and remains the most politically sensitive part of the inflation story. Prices for store-bought groceries rose 11% in October from a year earlier, according to Statistics Canada, his 11th straight month of topping headline figures.

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Conclusion

Inflation is more than three times faster than the Bank of Canada’s 2% target, so the central bank will almost certainly raise interest rates again at its next meeting in early December. . When the central bank raised its benchmark rate by half a percentage point last month, it said, “The Governing Council expects that the policy rate will need to be raised further given rising inflation and inflation expectations, as well as continued demand pressures in the economy. there are,” he said. , to 3.75 percent. The latest figures don’t change that plan, but could allow the central bank to start considering pausing rate hikes at some point in his early 2023.

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