MNI: Canada CPI Slows As Expected, Conflicting Core Measures

Canadian inflation slowed as expected in October to 2.2% from 2.4% on lower gasoline prices while different core measures remained elevated because of food and shelter costs.

Consumer prices excluding food and energy quickened to 2.7% in from September's 2.4% in Statistics Canada's report Monday from Ottawa. The Bank of Canada's core inflation measures slowed with the trim measure down a tenth to 3% and the median index at 2.9% from 3.1% in September, still around the top of the central bank's target band for headline prices. 

The report does little to alter Bank of Canada Governor Tiff Macklem's view his Oct. 29 rate cut to 2.25% may be sufficient to keep inflation near his 2% target and support an economy hit by U.S. tariffs. While some economists see trade damage requiring another rate cut early next year, a further reduction with sticky core measures could be risky to its reputation. The policy rate has already been cut from a peak of 5%. 

Officials have also struggled to explain underlying inflation, expanding the range of measures they are tracking and based on that review saying the trend is about 2.5%. October figures show a familiar pattern of elevated food and shelter prices with rents up 5.2% and restaurant meals gaining 3.2%. Grocery inflation slowed to 3.4% in October from a 4% increase in September but that pace has exceeded total inflation for nine straight months. 

Gasoline prices fell 9.4% from a year earlier but part of that is a one-time elimination of a federal carbon tax. Bank officials in the minutes of their last meeting said they expect to look through some of this choppiness and also a swing from a temporary reduction of the federal sales tax. Overall the Bank said economic weakness from the trade war with the U.S. will help keep inflation close to target, even as tariffs disrupt supply chains.