Morning Market Brief: November 22, 2023

Canadian inflation softens in October?

Moderation in grocery price increases and easing oil prices contributed to the lowest annual inflation in Canada in almost two years. The inflation report will be factored into the Bank of Canada’s (BoC) final interest-rate decision of 2023. Although inflation has eased this year, it remains above the BoC’s 2% target.?

• Annual inflation fell to 3.1% in October from 3.8% in September, according to Statistics Canada (StatsCan). The BoC forecasted inflation levels to stay around 3.5% into mid-2024. The largest components of inflation were mortgage, rent and grocery costs.
• The decrease was expected, partially as a result of declining oil prices and higher interest rates. Oil prices fell by 7.8% month-over-month.
• Food inflation eased for the fourth straight month, with prices growing by 5.4% annually in October compared to the previous month’s 5.8% increase, according to StatsCan.
• Measures of core inflation, which strips out volatile components, ranged from 2.0% to 3.5%. The slowdown in inflation gives policymakers some confidence that rate increases are cooling the economy and may open the discussion to potential rate cuts in 2024.

Policymakers have been anticipating progress on the inflation front and will welcome this positive movement. The slower pace of consumer price increases supports the idea that rates are high enough to dampen inflation. As you consider financial planning for 2024, make sure your investment plan reflects potential adjustments to the inflationary background. The BoC’s next rate decision will be released on December 6. The central bank held rates steady at 5.00% at its previous meeting.

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