Canada's annual inflation rate rose to 2.4 percent in September as food prices rose and gas and travel prices fell at a slower pace, Statistics Canada said Tuesday.
Economists had expected the overall rate to reach 2.2%. Excluding gas, the annual inflation rate increased to 2.6 percent, the data agency said.
Shoppers paid four percent more at the grocery store in September compared to the same period last year, largely due to more expensive fresh vegetables and sugary foods.
Food inflation has generally been on an upward trend since April, according to Statistics Canada. Fresh and frozen beef and coffee contributed to the higher rate, in part because both are in short supply.
Rental prices also continue to fuel inflation, rising to 4.8% year on year. House prices are the largest component of the inflation basket.
Meanwhile, gas prices fell at a slower pace in September – to 4.1 percent year on year – compared with the same period last year.
Prices fell last year as crude oil prices fell due to concerns about slowing economic growth in the United States and China; Refinery failures in the U.S. and Canada pushed up gasoline prices last month, according to Statistics Canada.
The cost of tourist tours in September also fell more slowly than last year.
While prices typically drop monthly at this time of year, prices have risen 4.6 percent since August as major events in the U.S. and Europe pushed up hotel prices.
The September inflation report is the final data release ahead of the Bank of Canada's next interest rate meeting on October 29.
The central bank tends to focus on its preferred core inflation measures, which exclude volatile sectors such as gas from the total. Two of these indicators remain above three percent, exceeding the central bank's inflation target range.
“Suffice to say, this will make next week's Bank of Canada decision a little more interesting than previously expected—markets were almost ready for a rate cut,” Douglas Porter, chief economist at Bank of Montreal, wrote in a note to clients.
BMO is not confident the central bank will make another rate cut next week, Porter said.
Stephen Brown, deputy chief economist for North America at Capital Economics, said in a note to clients that the latest inflation data coupled with a stronger-than-expected September jobs report should temper expectations for a rate cut later in the month.
But he said Capital Economics is “still leaning towards another rate cut” following comments from Bank of Canada Governor Tiff Macklem expressing concern about a weak jobs market last week.
