TD on CPI printTD Says Higher Prices at The Pump Keep Canada's Inflation Elevated in October; Still Sees Bank of Canada 50bps December Rate Hike
10:21 AM EST, 11/16/2022 (MT Newswires) -- TD said that the Canadian consumer price index (CPI) inflation held steady in October, at 6.9% year-on-year (y/y) compared with September.
Higher gasoline prices in October were a key culprit in keeping inflation elevated, stated the bank. Prices at the pump surged 9.2% m/m in October, after three months of decline, and were up 17.8% versus a year ago.
Food inflation did ease very slightly, with prices up 10.1% y/y in October, down from 10.3% in September. Food purchased from stores was up 11% y/y.
The signals from various core inflation measures were mixed, noted TD. CPI excluding food and energy was 5.3% higher versus a year ago, a tick lower than 5.4% in September. However, the average of the three Bank of Canada (BoC) core inflation metrics remained unchanged (after rounding) at 5.4% y/y. Perhaps more importantly, the two measures that the BoC had indicated provided a more timely gauge of underlying inflation through the pandemic -- CPI-trim and CPI-median, both picked up a tick to 5.3% y/y and 4.8% y/y respectively.
Shelter inflation accelerated in October, up 6.9% y/y, versus 6.8% in September, despite a cooling in homeowners replacement costs (+6.9% y/y from 7.7% y/y in September). Upward pressure came from higher mortgage interest costs (+11.4% y/y) -- which saw the highest increase since 1991 -- and rents (+4.7% y/y versus 4.2% in September).
Wednesday's inflation report underscored the need for the Bank of Canada (BoC) to keep the pressure on interest rates to help bring down inflation, according to TD. October's CPI report was one of two key remaining data releases before the BoC's next rate decision in three weeks and it certainly ticked the box for another 50 basis point increase.
The other key piece of data will be the November jobs report in a couple of weeks. As outlined in the bank's recent report on job vacancies Canada's labor market remained very tight. Even if TD saw a weak report, it was unlikely to move the needle enough on the job market to move the BoC off its tightening bias.