Statistics Canada says annual inflation rate slowed to 3.1% in October

“The economy is no longer overheated. Other signs of a cooling economy, in addition to inflation, include a slowdown in hiring — companies are not going out to hire as much anymore — as well as just overall lower consumer demand.”

The price of gasoline fell 7.8 per cent from a year earlier, though the drop was driven partly by the wider-than-usual difference between prices this fall compared with last October, when gas prices spiked after an OPEC production cut.

It compared with a 7.5-per-cent year-over-year increase in gas prices during September.

Excluding gasoline, Statistics Canada said the consumer price index was up 3.6 per cent for October, following a 3.7-per-cent increase for September.

The Bank of Canada, which is working to bring inflation back to its target of two per cent, opted to hold its key interest rate steady at five per cent at its last rate decision, but it has said it is prepared to raise rates again if needed.

In its summary of deliberations released earlier this month, the central bank said some members of its governing council felt it was more likely than not that its policy rate would need to increase further to return inflation to the target level, while others viewed the most likely scenario as one where the current rate would be enough, provided it was maintained long enough.

Bank of Montreal chief economist Douglas Porter also said the inflation report underscored expectations that there would be no need for further rate hikes by the Bank of Canada, 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,” Porter wrote in a note to clients.

Nguyen said she expected the Bank of Canada wouldn’t start cutting its key interest rate until the second quarter of next year and then would proceed with rate cuts at only a modest rate.

“Even though I don’t think there’s any need to hike further, they need to see evidence of sustained disinflation for several months before they can feel comfortable scaling back,” she said.

“Once they start cutting interest rates in the second quarter of next year it is going to be a slow and gradual decline. We might end 2024 at four per cent.”

The October inflation report found prices for goods were up 1.6 per cent, while prices for services were up 4.6 per cent, largely due to higher prices for travel tours, rent and property taxes and other special charges.

Statistics Canada said the largest contributors to inflation continued to be mortgage interest costs, food purchased from stores and rent.

Mortgage interest costs were up 30.5 per cent compared with a year ago, while the cost of rent was up 8.2 per cent.

While grocery prices rose faster than overall inflation, Statistics Canada said the pace continued to slow. Grocery prices were up 5.4 per cent year-over-year in October compared with a 5.8-per-cent move higher in September.

Bank of Canada governor Tiff Macklem is scheduled to give a speech on Wednesday to the Saint John Region Chamber of Commerce on the high cost of inflation, while the central bank’s final interest rate decision for the year is set for Dec. 6.

This report by The Canadian Press was first published Nov. 21, 2023.

by The Canadian Press

Statistics Canada says annual inflation rate slowed to 3.1% in October

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