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Canada's annual inflation rate fell to 2.2 percent in October, largely due to a faster fall in gas prices, Statistics Canada reported Monday.
Fuel prices fell 9.4% in October after falling 4.1% in September as drivers switched to cheaper winter gasoline blends and crude oil prices fell “amid ongoing concerns about supply oversupply,” the data agency wrote.
Excluding gasoline, inflation last month was 2.6%, the same as in September.
The details of the inflation report “were a little disappointing,” wrote BMO chief economist Douglas Porter, “as lower gasoline and food prices were the main reason for the slowdown, while many core prices rose.”
The Bank of Canada indicated during its the most recent interest rate decision that he expects inflation to remain close to the two percent target in the coming months.
Governor Tiff Macklem then suggested the bank would keep rates at current levels if inflation remained close to its forecast two percent.
The bank's preferred measure of core inflation, which excludes volatile sectors or one-time tax changes from the headline measures, has hovered closer to 3 percent, and some of those measures softened in October.
Last month, food prices rose at a slower pace, contributing to the overall decline. But prices are still high and have outpaced headline inflation for nine straight months, according to Statistics Canada.
Prices for other processed foods (a category that includes mostly processed foods) rose more slowly, as did prices for fresh vegetables, but this was offset by increases in prices for fresh or frozen chicken.
Slower increases in gasoline and food prices were partially offset by higher cell phone prices. Home and auto insurance price increases also accelerated in October, with prices for both categories rising the most in Alberta.
“The new news here is not good, driven by sustained increases in insurance costs and soaring cell phone rates,” Porter wrote, adding that the report is “just more reason to believe the bank [of Canada] fades into the background in December” and will not reduce rates further at this time.
