Statistics Canada released its inflation data for the month of October this morning. The Consumer Price Index (CPI) rose by 2.0% year over year last month, up from the 1.6% increase recorded in September. However, excluding energy, the inflation rate remained stable at 2.4% in October (see chart below).
The Bank of Canada places greater emphasis on core inflation—excluding the most volatile components such as energy—when setting monetary policy. Since the trend in inflation excluding energy continues to decline, this morning’s data is unlikely to fundamentally alter the Bank’s decision regarding its policy rate on December 11.
Most experts expect another rate cut, although opinions differ on whether the reduction will be 0.25 or 0.50 percentage points. It is worth noting that the Bank of Canada’s policy rate influences financial institutions’ prime rates and, in turn, interest rates on variable-rate mortgages.