Canada’s yearly inflation rate surged to 2.4 percent in September, driven by an uptick in grocery prices and a slower decline in gas and travel tour costs, as per Statistics Canada’s latest update. Economists had anticipated a figure of 2.2 percent. Excluding gas prices, the annual inflation rate climbed to 2.6 percent, according to the data agency.
During September, consumers faced a four percent increase in grocery expenses compared to the same period last year, predominantly due to higher prices of fresh vegetables and sugary products. The inflation in grocery prices has been on an upward trajectory since April 2024, with fresh and frozen beef and coffee contributing to the spike, partly due to limited availability.
Nathan Janzen, RBC’s assistant chief economist, highlighted the volatility in food prices in Canada, noting that while one-month changes may not reflect a significant trend, the persistent growth in food prices has consistently outpaced overall inflation rates in recent years.
Housing rental costs also played a role in driving inflation, rising to 4.8 percent year-over-year. Shelter expenses represent a significant portion of the inflation basket.
On the other hand, gas prices saw a milder decline of 4.1 percent annually in September, compared to the previous year, attributed to refinery disruptions in the U.S. and Canada, which led to higher petrol costs.
Travel tour expenses registered a slower pace of decrease in September compared to the previous year. Despite the typical monthly price drops during this period, costs rose by 4.6 percent from August, influenced by major events in the U.S. and Europe contributing to higher hotel rates.
The latest inflation report precedes the Bank of Canada’s upcoming interest rate meeting on Oct. 29. While inflation remains within the bank’s target range of one to three percent, it has exceeded the midpoint of the range, prompting considerations for future monetary policy decisions.
The Bank of Canada typically focuses on core inflation measures that exclude volatile sectors like gas. Two of these core measures are currently above three percent, surpassing the bank’s target range. Market analysts are now reconsidering rate cut expectations following the recent inflation data and a stronger-than-expected jobs report for September.
Bank of Montreal’s chief economist, Douglas Porter, indicated that the central bank’s decision may be more nuanced than previously anticipated, with uncertainty over another rate cut. Capital Economics also expressed a similar sentiment, leaning towards a rate cut post Bank of Canada Governor Tiff Macklem’s concerns about a soft job market.