Canada’s yearly inflation rate fell to 2.2 per cent in October as lower gas prices, softening food costs, and mortgage interest rates dipping below 3 per cent tamed price growth, according to data published by Statistics Canada on Monday.
The deceleration represents a continuation of recent trends and was largely driven by government policies like the scrapping of a carbon tax on gas.
Without the impact of the carbon tax, the year-over-year consumer price index (CPI) increased by 2.7% in October, a decrease from September’s 2.9% rate.
Inflation was expected by analysts polled by Reuters to ease to 2.1%, a slight decrease from September’s 2.4%.
Against forecasts, October monthly inflation rose by 0.2%.
Fuel prices lead the decline
One significant factor in the declining rate of inflation was the cost of gasoline.
Compared to a 4.1% decrease in September, the monthly decrease in gas prices was greater in October, resulting in a year-over-year drop of 9.4%.
This year’s persistent year-over-year drop in fuel prices, which has slowed the economy’s overall price increase, has been largely attributed to the repeal of the carbon charge on gasoline.
Food prices decline but stay high
The reduction of food costs was another element contributing to the decrease in inflation.
Grocery shop prices increased by 3.4% in October compared to a 4.0% increase in September.
For the eighth consecutive month, grocery prices were higher than the general inflation rate despite this decline, underscoring the ongoing strain that food costs place on Canadian households.
Mortgage interest costs fall below 3%
For the first time in more than three years, mortgage interest costs, a component of housing inflation, grew at an annual rate of 2.9% in October, falling below the 3% threshold.
Rent inflation, on the other hand, increased by more than 5% for the second month in a row.
These housing-related expenses, which continue to be a major factor in total inflation rates, have been extensively watched by analysts and policymakers.
Core inflation provides a steady signal
The Bank of Canada and private-sector economists closely monitor longer-term price trends by tracking core inflation measures that strip out volatile components and the effects of tax changes.
In October, CPI-median — the midpoint of the inflation distribution — eased to 2.9%, down from a downwardly revised 3.1% in September.
CPI-trim, which excludes the most extreme price movements, slipped to 3.0% from 3.1%.
Other inflation indicators also point to gradually easing pressures, though volatility persists in categories such as fuel and food.
One of the key reasons the Bank of Canada signalled a pause in rate cuts last month was the stability of inflation.
Another decline in October is likely to reinforce its decision to hold the policy rate at 2.25% at its meeting next month.
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