The smaller decline is partly attributed to a base-year effect, as prices fell 6.4% month over month in October 2023, stemming from lower refining margins and weaker global oil consumption.

On a monthly basis, prices for gasoline were up 0.7% in October, following a 7.1% decline in September.

Slower rise in shelter prices

Shelter price growth continued to ease in October, rising 4.8% year over year, compared with a 5.0% increase in September. Slower price growth in the mortgage interest cost index in October (+14.7%) compared with September (+16.7%) applied downward pressure on the shelter component. Mortgage interest costs have been decelerating year-over-year since September 2023, following a peak in August 2023 (+30.9%).

Similarly, rent prices grew at a slower pace in October, increasing 7.3% on a year-over-year basis, following an 8.2% gain in September. Nova Scotia (+5.2%) and Manitoba (+6.5%) decelerated the most. Although slowing, rent prices continue to increase and remain elevated. Compared with October 2021, rent prices increased 21.6%.

After the release, overnight swaps traders trimmed their bets for a second consecutive large rate cut to about one in three, from a little less than a coin flip previously.

The first acceleration of headline inflation in five months may bolster a case for the Bank of Canada to reduce borrowing costs gradually. After officials stepped up the pace of easing in October with a half-point cut, the next and this year’s final rate decision is on Dec. 11.

Still, Tuesday’s inflation print didn’t eliminate bets for another jumbo rate cut. That’s because the central bank had already expected a bump along the road, with consumer prices hovering around 2%, as policymakers keep cutting rates to boost economic growth.

When Governor Tiff Macklem and his officials delivered their outsize rate cut last month, they said they wanted to see a pickup in growth and demand. Preliminary industry-based data point to 1% annualized GDP growth in the third quarter, below the central bank’s 1.5% estimate. Final expenditure-based gross domestic product data is due at the end of this month.

The November employment report, released on December 6, is another critical data point for the central bank. The unemployment rate has been steady at 6.5% for the past two months. A meaningful rise in the jobless rate could encourage the Governing Council to go another 50 bps lower at their next meeting. That and GDP figures (released on November 29) will be watched closely to game the Bank of Canada’s next move. A 25 bps cut in the overnight policy rate is in the bag. A 50-bps cut is less likely.

Either way, the overnight policy rate, now at 3.75%, will be cut to roughly 2.5% by the middle of next year. This will continue to spur housing activity and could augur for a robust spring housing season.