Canada's Inflation Surge Ahead of Key Monetary Decision

Canada's inflation rate increased to 2.4% in September, largely due to smaller declines in gasoline prices and rising food costs. This data comes before the Bank of Canada's monetary policy decision. Money markets anticipate an 86% chance of a rate cut, potentially lowering the benchmark rate to 2.25%.

Canada's annual inflation rate rose to 2.4% in September, prompted by a smaller decline in gasoline prices compared to prior months and an uptick in food costs. The release of this data is critical as the Bank of Canada prepares for its upcoming monetary policy decision. Economists closely monitor this data to understand potential directions for interest rate cuts.

The money market's prediction gives an 86% probability of a 25 basis point cut in the policy rate by the end of October, setting it at 2.25%. While analysts had expected inflation to hit 2.3%, September's figures reflected an increase from the previous month's 1.9%.

Despite a declining trend in annual gasoline prices due to the removal of the carbon levy, September saw a slighter decrease than August, attributed to last year's larger drop amid weak economic prospects. Meanwhile, food prices saw a 3.8% rise, partially driven by higher grocery costs, marking the most significant annual increase since April 2024.

(With inputs from agencies.)