Economists react to the new CPI stats ahead of the central bank’s meeting next week
With the latest Consumer Price Index data coming more than a week ahead of the Bank of Canada’s October 29 policy meeting, economists are pointing to a nuanced reading of the data.
The stats suggest that while headline inflation may be moderating, the underlying measures remain resilient and could make the central bank more cautious about immediate rate cuts. Wealth Professional has been curating the reaction of leading economists from Canada’s biggest banks.
September’s headline CPI rise to 2.4% year-over-year, up from 1.9% in August, reflects softer downward pressure from gasoline and a pick-up in food prices. But the BoC’s preferred core gauges remain elevated.
Economists say that the BoC's October policy decision is far from a foregone conclusion, even though markets may have been leaning toward a rate cut.
RBC’s Abbey Xu says that, while inflation is above the 2% target, it was last month when the BoC decided to cut. The bank expects a cut next week before the central bank pauses.
TD’s Andrew Hencic also expects a cut, noting that there are risks associated with not acting and that there is slack in the economy.
CIBC’s Andrew Grantham says that the firm inflation stats make the BoC decision “a little more complicated” but believes that there is enough data to justify a cut. He agrees that it is likely to be the last for a while.
Scotiabank’s Derek Holt aligns with the majority in predicting a cut: “They’d need good arguments against a cut that I don’t think they have in relation to disappointing the two-thirds market pricing of a 25bps cut. From a risk-reward standpoint, it may be more difficult to justify holding than to cut and, if they agree, sound like they’re shifting to the sidelines,” he wrote in his response to the CPI report.
However, BMO’s Doug Porter says that while economic growth is weak, the risk of core inflation remaining elevated is the more pressing concern for the BoC, setting the stage for further rate relief in coming months but not necessarily at the October meeting.
