September CPI keeps Bank of Canada hold in play
Canada’s annual inflation rate climbed to 3.1% in September, up from 3.0% in August, according to Statistics Canada data released Monday — and economists say the reading gives the Bank of Canada (BoC) little reason to lift its overnight rate at the October 28 meeting.
Energy drove nearly all of the acceleration. Gasoline prices surged 27.8% year over year, up from 22.8% in August, as crude oil reached its highest level since May amid ongoing Middle East conflict.
Broader energy costs rose 19.0% annually, following a 15.4% gain the prior month. Excluding energy entirely, the Consumer Price Index (CPI) rose just 2.2%.
Core pressures stay contained
For mortgage brokers advising clients on rate timing, the more instructive signal came from the BoC’s preferred core measures.
CPI-median fell to 1.9% in September from 2.0% in August, while CPI-trim eased to 1.8% from 1.9%, both moving away from hike territory and averaging 1.9% across the two, down from 2.0% the month prior.
Leslie Preston, managing director and senior economist at TD Economics in Toronto, offered a clear verdict.
“No jump scares in Canada’s inflation in September,” she said.
“There is little evidence higher energy costs are bleeding through to broader price pressures, which remain mild. Today’s number supports our view that the Bank of Canada can remain on hold this year.”
That view aligns with analysis from Abbey Xu, economist at Royal Bank of Canada in Toronto, who found limited evidence that elevated energy costs were generating significant second-round inflation in her reading of August’s data, a conclusion September’s numbers do nothing to challenge.
Grocery prices also moderated further. Food purchased from stores rose 1.7% year over year in September, the smallest annual gain since May 2024, down from 2.8% in August.
Shelter prices edged up 1.8%, with rent rising 2.8%.
What October 28 means for brokers
The September CPI release is the last major data point before the October 28 decision, which will be accompanied by a full Monetary Policy Report.
As CMP reported following Canada’s September labour market shock, a deteriorating jobs picture had already pulled near-term hike expectations sharply lower.
Charles St-Arnaud, chief economist at Servus Credit Union in Edmonton, described the Governing Council’s bind plainly.
“We believe it will opt for patience,” he said.
“As a result, we think the BoC will keep its policy rate unchanged for the rest of the year, unless there are signs in the CPI data of a broadening of inflation.”
Dr. Sherry Cooper, chief economist at Dominion Lending Centres (DLC) in Vancouver, pointed directly to Monday’s release: “The Bank of Canada will likely hold off on a rate hike, especially if the inflation data released on October 19 brings no nasty surprises.”
With the overnight rate at 2.25%, held across eight consecutive meetings, mortgage professionals navigating client conversations ahead of the October 28 BoC decision now have their clearest signal yet.
As Leah Zlatkin, a licensed mortgage broker and LowestRates.ca expert, has cautioned: “There’s no clear signal that rates are heading materially lower, and in some cases we’re already seeing lenders adjust pricing upward.” October 28 looks unlikely to change that.
Source CMP
By Liezel Once
