{"id":65636,"date":"2025-10-21T15:52:47","date_gmt":"2025-10-21T15:52:47","guid":{"rendered":"https:\/\/www.pantheregroup.com\/2025\/10\/21\/sticky-inflation-wont-stop-bank-of-canada-from-cutting-rates-one-more-time-say-economists\/"},"modified":"2025-10-21T15:52:47","modified_gmt":"2025-10-21T15:52:47","slug":"sticky-inflation-wont-stop-bank-of-canada-from-cutting-rates-one-more-time-say-economists","status":"publish","type":"post","link":"https:\/\/www.pantheregroup.com\/2025\/10\/21\/sticky-inflation-wont-stop-bank-of-canada-from-cutting-rates-one-more-time-say-economists\/","title":{"rendered":"Sticky inflation won&#039;t stop Bank of Canada from cutting rates one more time, say economists"},"content":{"rendered":"<p> \n<br \/><br \/>\n<iframe loading=\"lazy\" title=\"Canada set for biggest deficit budget ever: Peter MacKay\" width=\"1080\" height=\"608\" src=\"https:\/\/www.youtube.com\/embed\/rfe6kws04GA?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><br \/>\n<\/iframe><\/p>\n<p> Economists say the <\/p>\n<p>                        inflation data<\/p>\n<p>                         for September complicates the <\/p>\n<p>                        Bank of Canada\u2019s<\/p>\n<p>                         interest rate decision next week, though they still think policymakers will cut again. <\/p>\n<p> Bets for a rate cut on Oct. 29 slightly fell after Statistics Canada said year-over-year inflation hit 2.4 per cent in September, mostly due to a smaller decrease in gasoline prices and a rise in grocery prices. Year-over-year inflation in August was 1.9 per cent. <\/p>\n<p> Many economists had called for inflation to accelerate in September, but not by as much as it did. The median estimate from economists tracked by Bloomberg called for inflation to come in at 2.2 per cent. <\/p>\n<p> Markets reduced the odds of a <\/p>\n<p>                        Bank of Canada rate cut<\/p>\n<p>                         to nearly 70 per cent from 77 per cent the day before the consumer price index (CPI) data was released, but expectations of a 25-basis-point trim to take rates to 2.25 per cent remained strong. <\/p>\n<p> Here\u2019s what economists say the inflation numbers mean for the Bank of Canada and its next interest rate decision. <\/p>\n<h2>\u2018A little more complicated\u2019: CIBC<\/h2>\n<p> \u201cA larger-than-expected acceleration in headline CPI makes the Bank of Canada\u2019s interest rate decision next week a little more complicated,\u201d Andrew Grantham, an economist at <\/p>\n<p>                        CIBC Capital Markets<\/p>\n<p>                        , said in a note. <\/p>\n<p> In addition, the Bank of Canada\u2019s two preferred measures of year-over-year core CPI \u2014 median and trim \u2014 came in at 3.2 per cent and 3.1 per cent, respectively. They stood at 3.2 per cent and three per cent, respectively, in August. <\/p>\n<p> But he said policymakers have recently moved away from focusing on those two measures and have instead turned to a broader range of data, including how widely price acceleration is spreading. <\/p>\n<p> Grantham said he thinks the averages of median, trim and a few other CPI measures are contained enough to allay the Bank of Canada\u2019s fears of a \u201cre-acceleration\u201d in these core measures. <\/p>\n<p> \u201cWe think that core measures of inflation were just about subdued enough, and the economy is certainly weak enough, to still justify a further 25-basis-point cut from the Bank of Canada next week,\u201d he said. <\/p>\n<p> After that, CIBC thinks the Bank of Canada will step back, partly because of some \u201clingering\u201d pressure from inflation, \u201cbut also on the assumptions that economic growth starts to recover and progress is made towards a trade deal that reduces some of the sector-specific tariffs currently impacting Canadian trade.\u201d <\/p>\n<h2>\u2018Mixed bag\u2019: TD<\/h2>\n<p> \u201cMeasures of underlying inflation were a mixed bag, either ticking higher or remaining unchanged in September,\u201d Andrew Hencic, an economist at <\/p>\n<p>                        TD Economics<\/p>\n<p>                        , said in a note. <\/p>\n<p> For example, CPI excluding food and energy came in unchanged at 2.4 per cent year over year, while CPI excluding the eight most volatile components was 2.8 per cent year over year, up from 2.6 per cent in August. <\/p>\n<p> \u201cUnderlying inflation appears to have firmed up in the past two months, but it remains within the Bank of Canada\u2019s target range,\u201d he said. \u201cAdding one hotter month does not a trend make.\u201d <\/p>\n<p> The Bank of Canada\u2019s target range for inflation is one per cent to three per cent. <\/p>\n<p> Hencic said the Bank of Canada has latitude to cut rates again given the \u201cfraught\u201d economic situation and an unemployment rate of 7.1 per cent, up from 6.6 per cent at the start of the year, which indicates the economy is sitting on plenty of slack, \u201csomething yesterday\u2019s Business Outlook Survey reinforced.\u201d <\/p>\n<h2>\u2018One more reduction\u2019: RBC<\/h2>\n<p> \u201cInflation continues to run above the (Bank of Canada\u2019s) two per cent target, but that was also true when the central bank cut the overnight rate in September,\u201d Abbey Xu, an economist at <\/p>\n<p>                        Royal Bank of Canada<\/p>\n<p>                        , said in a note. <\/p>\n<p> In September, policymakers cut rates by 25 basis points even though their preferred measures of core inflation stood at or slightly above three per cent. <\/p>\n<p> She said other factors should convince the Bank of Canada that inflation pressures have let off some steam, including a higher unemployment rate, falling inflation expectations recorded in the Business Outlook Survey and the elimination of Canada\u2019s retaliatory tariffs in September. <\/p>\n<p> \u201cOur base case assumes one more reduction in the overnight rate next week in October,\u201d she said. <\/p>\n<p> That would put the rate at 2.25 per cent, the lower end of the neutral range of 2.25 per cent to 3.25 per cent, where rates neither stimulate nor slow the economy. <\/p>\n<p> After that, further rate cuts are a tougher sell. <\/p>\n<p> \u201cWe expect cutting beyond that, into outright stimulative levels of interest rates, will be more difficult with inflation still sticky at an above-target rate and fiscal policy potentially ramping up as a support after the federal budget in early November,\u201d Xu said. <\/p>\n<ul class=\"related_links\">\n<li>Inflation heats up before Bank of Canada decision<\/li>\n<li>Bank of Canada&#8217;s business survey results leave &#8216;ample room to cut&#8217; interest rates, economists say<\/li>\n<\/ul>\n<p> <em>\u2022 Email: gmvsuhanic@postmedia.com <\/em> <\/p>\n\n<br \/>Sticky inflation won&#039;t stop Bank of Canada from cutting rates one more time, say economists<\/a><br \/>\n<br \/>2025-10-21 15:52:47<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Economists say the inflation data for September complicates the Bank of Canada\u2019s interest rate decision next week, though they still think policymakers will cut again. Bets for a rate cut&#8230;<\/p>\n","protected":false},"author":2,"featured_media":65637,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":{"0":"post-65636","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy"},"_links":{"self":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/65636","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/comments?post=65636"}],"version-history":[{"count":0,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/posts\/65636\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media\/65637"}],"wp:attachment":[{"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/media?parent=65636"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/categories?post=65636"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pantheregroup.com\/api\/wp\/v2\/tags?post=65636"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}