BOC: Canada Analysts Nearly Unanimous That October Cut Still On Track (2/2)

Continuing through Canadian analyst reviews of CPI (the below all expect a 25bp cut on Oct 29) below. MNI's BOC meeting preview will be published on Monday October 27.

• Desjardins: "While the higher‑than‑expected pace of inflation in September may complicate the Bank of Canada’s messaging, a good part of the acceleration in the month can be explained by events a year ago as opposed to what is happening today. As such, we think that headline inflation could comfortably return to around 2% in the fourth quarter, supported by the recent reduction in retaliatory tariffs on goods imports from the US. When combined with the Bank’s downbeat business and consumer surveys, a still elevated unemployment rate and an economy that looks like it might barely manage to escape a recession in Q3, we remain of the view that the BoC will cut the policy rate by another 25 basis points at its upcoming meeting."
• National: "Deputy Governor Mendez's recent speech clearly indicated that the Bank of Canada had made another U-turn in regard to their core measures by stating that CPI-Trim and CPI-Median should no longer be prioritized. For this reason, we will now track these two measures, as well as inflation excluding food and energy (CPIXFET) and the CPIX (the Bank of Canada's former core inflation measure).Taking the average of these four measures, the price increase in September was only 0.24%, which is uncomfortable for the Bank of Canada but much less worrying than the increase in the total index. Over three months, the annualized rate of increase is 2.3%, only a few tenths of a percentage point above the target... As for inflationary pressures, there was no indication in the BOS that businesses felt they had pricing power. In conclusion, we continue to favor a rate cut at the next decision, and the need for further accommodation will depend on the federal budget and a potential de-escalation of trade tensions with the United States."
• RBC: "Inflation continues to run above the BoC's 2% target, but that was also true when the central bank cut the overnight rate in September. The breadth of inflationary pressure did narrow slightly by our count in September. A higher unemployment rate, lower business inflation expectations in the BoC's own Business Outlook Survey, and the removal of most Canadian counter-tariffs, should reinforce the BoC's view that upside inflation risks have eased - and our base-case assumes one more reduction in the overnight rate next week in October...We expect cutting beyond that, into outright stimulative levels of interest rates, will be more difficult with inflation still sticky at an above-target rate and fiscal policy potentially ramping up as a support after the federal budget in early November."
• Scotiabank: "Canadian core inflation measures remain good enough for the BoC to cut next week when properly evaluated in terms of month-over-month trends and breadth...Key is that each of the main core measures of inflation were well within the flexible 1–3% headline inflation target range and were likely overstated by mechanistic seasonal adjustments that may not be appropriate...I think the BoC will work the flexible inflation target range that Macklem keeps emphasizing and deliver easing next Wednesday but with a hawkish sounding and noncommittal feel."
• TD: "Overall, we do not think the September CPI report will be enough to shift the Bank of Canada's assessment on the risks around inflation, and we continue to look for them to deliver another 25bp cut in October. 3m rates of core inflation were more stable between August and September, and inflation pressure were less broad based in the September CPI report. The Q3 BOS also noted that firms are having a more difficult time passing down higher input costs, which should make it easier to look through the stronger performance for CPI-trim/median."