Canadian annual inflation eased to 2.2% in October, in line with market expectations, as lower gasoline and food prices and mortgage interest costs fell below 3% for the first time in more than three years. Excluding the removal of the carbon levy, annual CPI rose 2.7% but was still slower than the previous month.
The decline in inflation supports the Bank of Canada’s stance to keep its policy rate at 2.25% next month after halting previous rate cuts. The sharp decline in gasoline prices is now down 9.4% year-on-year and remains a key driver of inflation.
Food prices are also showing signs of slowing, rising 3.4% from a year earlier compared with 4% in September. However, retail prices have remained above headline inflation for the ninth straight month, suggesting cost pressures remain significant for consumers.
Housing inflation was mixed, with mortgage interest costs falling to 2.9%, but rental inflation rose above 5% for the second consecutive month. Core inflation measures such as CPI-median and CPI-trim also showed small declines to 2.9% and 3.0% respectively.
The Canadian dollar fell slightly after the data was released, while two-year bond yields remained lower. This trend reflects the market view that inflation is stabilizing and raises the possibility that monetary policy will be kept unchanged next month.
