Friday , May 7 2021

The inflation rate is increasing, but the Bank of Canada is likely to keep interest rates steadily in December

OTTAVA – The annual inflation rate in Canada has remained above the central bank's target of the nine-month month in October, data showed on Friday, but markets saw several signs that the Bank of Canada will increase interest rates next month.

Canada's statistics show that the annual inflation rate rose to 2.4 percent from 2.2 percent in September. Analysts in the Reuters poll predicted they would stay at 2.2 percent.

The Central Bank, who consistently said that inflation will start at the target of 2 percent by the beginning of 2019, announced the next decision on the interest rate on December 5th.

Andrev Grantham, a senior economist at CIBC Capital Markets, said the lower oil prices – one of Canada's major exports – will soon begin to lower inflation.

"We do not see anything here in order to tilt the hand of the Bank of Canada to visit in December," he said in a telephone interview.

Market expectations of an increase in the interest rate on December 5, reflecting on the swap market's stagnation market, fell to 23.20 percent from 23.40 percent. Earlier this month, that number was over 30 percent.

Two of the three core inflation measures of three central banks recorded gains, while the CPI is common, for which the bank says it is the best indicator of the weak performance of the economy, unchanged to 1.9 percent.

"I think we will see in November reading that the main figure drops well below 2%," said Doug Porter, chief economist at BMO Capital Markets.

The Bank of Canada has increased rates five times since July 2017 and says an increase will be needed. Steps are growing at a "right" pace, Governor Stephen Poloz said on November 5th.

Tourist travel prices increased by 3.0 percent compared to October 2017, compared to a decline of 4.4 percent compared to last year. Prices of passenger cars rose by 1.7 percent compared to a year earlier at lower rebates and a larger number of models.

The Canadian dollar has prolonged the decline in data, adding $ 1,3324 to the US dollar or 75.51 US cents.

Separatelli, Statistics Canada, said the value of retail sales rose 0.2 percent in September from August, partly due to higher sales in grocery stores. Eliminating the effect of price changes, the volume was increased by 0.5 percent.

"I think it's a little pleasant surprise. It's nice to see how much they come, a good way to end the quarter," said Brian DePratto, senior economist at TD Bank.

© Thomson Reuters 2018

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