Canada's annual inflation rate rose to 3.1% in September
TLT•Canada's annual inflation rate rose to 3.1% in September, driven largely by a 19% annual increase in energy prices, while monthly CPI rose 0.1%. Money markets were betting the Bank of Canada would hold its rate at 2.25% on October 28, while pricing in a 25-basis-point hike in December.
1. Inflation and prices
Canada's annual inflation rate rose to 3.1% in September, after three months below the Bank of Canada's upper limit. The consumer price index increased 0.1% month over month, following a 0.1% decline in August. Analysts had forecast annual inflation of 3.2%, up from 3.0% in August.
2. Energy and other costs
Energy prices rose 19% year over year, following a 15.4% increase in August, while gasoline costs rose 27.8%. Grocery prices rose 1.7% annually, the smallest increase since May 2024. Shelter prices rose 1.8% annually, rents increased 2.8%, and air transportation rose 19.4%. CPI-median slowed to 1.9% and CPI-trim was 1.8%.
3. Rate expectations
The September CPI report was the last inflation data before the Bank of Canada's policy decision later in October. Money markets were betting the central bank would hold its rate at 2.25% on October 28, while pricing in a 25-basis-point hike in December. The Canadian dollar firmed after the data, and two-year government bond yields rose 7.7 basis points to 2.545%.
