This increase is mostly due to the following reasons:
Falling Gasoline Prices
Gasoline prices fell sharply in September, contributing to a fall in the consumer price index (CPI). Prices fell again in October, increasing upward pressure on inflation. When you remove gasoline from the equation, the inflation rate has remained at 2.2 per cent over the last three months.
Rising Property Taxes
Property taxes rose to six per cent, 1.7 per cent higher than the same time last year, reaching the highest it’s been since 1992. The tax increase has put more pressure on Canadian households, pushing inflation upwards.
Rising Grocery Prices
Grocery prices have been rising faster than the overall inflation rate, outpacing other categories for the third consecutive month. The main culprits were preserved fruits and fresh vegetables, making it harder for Canadians to get by.
Falling Housing Inflation
Housing inflation has shown signs of cooling, dropping to 4.8 per cent on a yearly basis. Slower growth in mortgage interest costs and rent prices contributed to this moderation. However, despite the deceleration, rent prices remain significantly higher than in recent years, having risen 21.6 per cent since October 2021.
Rate Cuts
The Bank of Canada is closely monitoring inflation trends as it prepares for its next policy decision in December. In October, the central bank reduced interest rates by 50 basis points, following reaching the two per cent inflation target in August. The Bank of Canada’s governor has hinted at further rate cuts, depending on economic conditions at the time.
Economic analysts are divided on what the Bank of Canada will do at their next meeting in December. Some believe the central bank will cut rates by another 50-basis-point cut but others think the bank will take a more cautious approach. Regardless, the October inflation report is unlikely to trigger a drastic policy shift decisions are usually made on a wide range of factors.
Looking Ahead
For consumers, higher costs in essentials like food and housing are likely to remain a concern, even as overall inflation stabilises. Policymakers must tread carefully, balancing support for economic growth while maintaining inflation within targets Regardless, the coming months will be pivotal in determining the trajectory of inflation and monetary policy in Canada.
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