The annual pace of inflation slowed in October as increases in the price of gasoline were smaller than in September, Statistics Canada reported Friday.
Its consumer price index was up 1.4% in October compared with a year ago, following a 1.6% increase in September.
Excluding gasoline, the index was up 1.3% compared with a year ago—more than the 1.1% increase in September.
In an economic research note, Nick Exarhos of CIBC Economics says the fact that inflation was muted in October is further proof that the Bank of Canada should “wait until the spring for another rate hike.” He forecasts a “tighter labour market and an economy operating closer to the limits of its capacity should eventually lead to hotter inflation,” but core metrics are still wide of the 2% target.
Prices were up in seven of the eight major categories compared with a year ago with the transportation and shelter categories contributing the most.
Transportation prices last month were up 3% compared with a year ago following a 3.8% increase in September, as gasoline prices rose 6.5% year over year in October (compared with 14.1% in September in the aftermath of Hurricane Harvey).
Shelter costs were up 1.2%.
Prices for alcoholic beverages and tobacco products were up 2.7% from a year ago, while food costs were up 1.3% as food bought in restaurants gained 2.9%.
Prices for clothing and footwear, the only category to move lower, fell 1.5% compared with a year ago as the cost of women’s clothing fell 4.6% compared with a year ago.
The Bank of Canada, which a uses a 2% inflation target in setting monetary policy, raised its key interest rate target twice this year following strong economic growth to start 2017.
However, economists expect growth for the second half of the year to come in at a slower pace and the central bank has suggested that while further rate hikes are likely, they will be cautious and pay close attention to the incoming economic data.
Of the Bank of Canada’s three preferred measures of core inflation, which seek to look through the noise of more-volatile items, CPI-common increased to 1.6% compared with 1.5% in September, while CP-median slipped to 1.7% from 1.8%. CPI-trim held steady at 1.5%.
Derek Holt, vice-president and head of Scotiabank Capital Markets Economics, says the central bank is likely not surprised by the cooler year-ago inflation rate, given it’s “forecasting 1.4% year-over-year CPI for Q4 (October MPR).”