Odds of second 50-bps Bank of Canada rate cut drop after stronger inflation report
The annual headline inflation rate for October climbed to 2.0%, exceeding the 1.9% economists had predicted and up from September’s 1.6% reading. The increase was largely due to higher gas prices, property taxes, and base-year effects, which can distort year-over-year comparisons.
And while fluctuations in the headline reading aren’t unusual, the ‘core’ inflation measures that strip out more volatile items like food and energy prices also ticked up in the month.
As a result, bond markets reduced the odds of a follow-up 50-basis-point rate cut at the Bank’s December 11 policy meeting to 23%, down from nearly 40% before the inflation report.
