Canadian core inflation eased on every measure — a rate rise on 28 October looks less likely.

The call

The news. Canadian inflation rose to 3.1% in September, a little below the 3.2% expected, and the rise was petrol. All three of the Bank of Canada's core measures eased and came in below forecast, with two of them now under the 2% target. With jobs falling for two months as well, the Bank has less reason to raise rates on 28 October, which leaves the Canadian dollar without that support. The misses were small and price rises are spreading more widely, so the case leans down rather than strongly down.

What these numbers are

CPI — the change in prices of the everyday goods and services households buy.

CPI-trim, CPI-median and CPI-common — the Bank of Canada's own measures of core inflation. Trim and median set aside the most extreme price moves each month, like petrol, to show the underlying trend. Common tracks the price changes that move together across the whole basket. These are the numbers the Bank watches, not the headline.

Why the Canadian dollar could weaken from here

The headline rise was petrol, up 27.8% on the year and adding more than a full percentage point on its own. Take petrol out and inflation fell to 2.2%, from 2.4%. Groceries rose 1.7%, the slowest since May 2024.

The Bank has said since the spring that it would look through energy and watch for it spreading. On the measures it relies on, this print points the other way: trim 1.8%, median 1.9%, common 2.4% — all lower than August and all below forecast.

Add two straight months of job losses and the argument for waiting is stronger than it was before this print. The Bank has held at 2.25% for a year. A currency whose central bank looks set to keep holding is less attractive to hold.

The weak spot

The core averages eased, but the spread of price rises did not. The share of items in the basket rising faster than 3% jumped to nearly half, from about a quarter in August. Over the past three months, core has been running at a 2.6% annual pace, up from 2.3%.

The Governor has also sounded more concerned than the data. Tiff Macklem has said the risk that inflation broadens and becomes more persistent "has gone up." RBC warns that raises the chance of a move before the numbers fully justify one.

What comes next

Later today — the Bank of Canada's quarterly business and consumer surveys. They show whether firms plan to pass higher costs on to customers.

28 October — Bank of Canada decision, with new forecasts — the first from a model built to separate temporary price jumps from lasting ones.

Sources

RBC Economics — core measures, petrol, breadth, three-month pace, Macklem · Eastern Herald — core against August, excluding petrol, groceries, Bank of Canada stance