BMO on CPI print BMO Notes Canada's October CPI Matches Consensus, Holds The Annual Inflation Rate Steady at Just Below 7%
09:58 AM EST, 11/16/2022 (MT Newswires) -- Bank of Montreal (BMO) noted that the Canadian consumer price index (CPI) Wednesday rose 0.7% m/m in October, holding the annual inflation rate steady at 6.9%.
While the result was right in line with the consensus call, any CPI that was no worse than expected should be viewed as a big win these days, and it was notably lower than the bank had anticipated. In seasonally adjusted (SA) terms, the monthly increase was still a meaty 0.6%, but that was mostly driven by a 9.2% pop in gasoline prices in the month. Excluding food and energy, prices rose a modest 0.2% m/m, even a bit milder than the United States reading for October (+0.3%), and trimming the annual pace of this core measure a tick to 5.3%.
Just to complicate matters, the Bank of Canada's (BoC) two main core metrics instead both edged up a tick on a yearly basis, with trim now also at 5.3% and the median at 4.8%.
BMO pointed out that the yearly 6.9% rate left Canadian inflation at the second lowest in the G7, above only Japan, while no fewer than three members now sporting double-digit tallies (Italy, Britain and Germany).
Food price increases moderated somewhat in October, rising by a SA 0.4% m/m after a pair of massive 1.2% jumps in the two prior months. For grocery prices specifically, the yearly increase finally backed off four ticks, although to a still-lofty 11.0% y/y. Property tax increases were recorded in October, and this was the second largest contributor to the overall CPI increase in the month, as they were up 3.6% this year versus just 1.5% in 2021.
Mortgage interest costs just keep rolling, rising at their fastest annual pace since 1991 at 11.4% y/y. On the flip side, Statistics Canada noted large monthly declines in both airfares and hotel rates -- however, both drops largely matched the seasonal pullbacks of a year ago, with the yearly rates almost holding steady at still-strong 18.5% and 26.4% clips (respectively).
The bank called Wednesday's data a tie, as it matched consensus and held the annual inflation rate steady at just below 7%. Given the big run-up in gasoline prices, that wasn't a terrible outcome. The modest ebbing in food inflation might also be a step in the right direction.
For the BoC, the 6.9% reading was a tad below its expectation for Q4 headline inflation (its latest call was 7.1% y/y) and kept the debate over the next rate decision very much alive -- between 25 and 50 bps hikes. BMO's official call was for +50 bps was under review.
Given that most measures of core inflation remained locked in a range of around 5%, the bank continued to believe that overnight rates will ultimately need to go above 4% to eventually crack underlying inflation.