OTTAWA (Reuters) -Canada's annual inflation rate increased to 2.4% in September mainly led by a smaller decline in gasoline prices on a yearly basis when compared with the previous month and rise in food prices, data showed on Tuesday.
This is the most crucial data point to be released before the Bank of Canada meets for its next monetary policy decision scheduled for later this month and will be closely watched by economists to gauge where the bank would cut rates again.
Money markets are betting
that the odds for a 25 basis point rate cut on Oct 29 is over 86%, which would bring the benchmark policy rate down to 2.25%.
Analysts polled by Reuters had forecast the annual inflation to rise to 2.3% in September from 1.9% in August.
The CPI rose 0.1% month over month in September from a decline on 0.1% in August, StatsCan said.
Gasoline prices have been on a declining trend on an annual basis as the government scrapped the carbon levy on the fuel which kept prices up all of last year.
However, the decline in September was less than August mainly due to a big fall in gasoline prices in September last year when the price of the fuel dropped 7.1% on dour global economic outlook.
Excluding gasoline, the CPI rose 2.6% in September following a 2.4% acceleration in August.
Economists have focused on the BoC's preferred core measures of inflation, which excludes the impact of tax measures, to gauge price trends.
One of the core measures of inflation, the CPI-median, or the centermost component of the CPI basket, was at 3.2% in September unchanged for a revised number last month on an annual basis.
The other core measure CPI-trim, which excludes the most extreme price changes, edged up to 3.1% in September from 3.0% in August, StatsCan said.
The share of the CPI basket that was above 3% price rise was at 37.9% in last month and the share of the CPI basket that was below 1% rise was at 38.5%.
Food prices increased by 3.8% annually after a 3.4% increase in August. This was mainly due a 4% increase in food purchased from stores, against a 3.5% increase seen in the previous month.
September 2025 marks the largest year-over-year increase in grocery prices since the most recent low in April 2024, the statistics agency said.
Rents also contributed to a year over year increase in CPI with a 4.8% jump in September, taking shelter inflation, the biggest component of the CPI basket, to 2.6%.
(Reporting by Promit Mukherjee; Editing by Dale Smith)
