Canada’s top bank economists have weighed in on October 28 after Tuesday’s CPI release
Four economists from Canada’s largest financial institutions are calling a Bank of Canada rate hold at the October 28 meeting in Ottawa, after September’s consumer price index (CPI) landed below market consensus and the Bank’s preferred core measures averaged 1.9% year-over-year.
The consensus is patience, but not without a dissenting voice on timing.
What economists are saying about the October 28 rate decision
Leslie Preston, Managing Director and Senior Economist at TD Economics in Canada, set the tone.
“No jump scares in Canada’s inflation in September, in contrast to higher inflation south of the border,” she wrote.
“Today’s number supports our view that the Bank of Canada can remain on hold this year. There is little evidence higher energy costs are bleeding through to broader price pressures, which remain mild.”
Abbey Xu, economist at RBC Economics in Toronto, flagged a more cautious signal from Governor Tiff Macklem himself.
Xu noted that Macklem, speaking at the IMF meetings in Bangkok, warned “the risk that inflation broadens and becomes more persistent has gone up,” and that the Bank has found it increasingly difficult to look through the direct impact of higher energy prices.
RBC’s base case holds the overnight rate at 2.25% through year-end before rising modestly in 2027.
Andrew Grantham, senior economist at CIBC in Toronto, went further, noting that bond yields moved before Tuesday’s release on the back of Macklem’s weekend remarks.
“It’s possible that a first interest rate hike could come earlier than the January move we previously forecast,” he said.
Dr. Sherry Cooper, Chief Economist at Dominion Lending Centres in Canada, read the September data as confirmation that energy is not yet spreading into broader price growth.
“Today’s inflation report reinforces our view that higher gasoline prices temporarily boost headline inflation while further eroding household purchasing power. However, these energy-driven increases, largely tied to geopolitical tensions, are unlikely to trigger a broader resurgence in underlying inflation,” she said.
On the Bank’s next move, Cooper was direct: “The September data support our base-case scenario that the Bank of Canada will remain on hold at its October 28 meeting. Policymakers will continue to closely monitor incoming inflation data and stand ready to tighten policy if price pressures broaden and become more persistent. Still, for now, underlying inflation trends in Canada remain consistent with a patient, wait-and-see approach.”
Behind the September CPI numbers
Statistics Canada’s September report showed headline CPI at 3.1% year-over-year, above August’s 3.0% but below the 3.2% consensus estimate.
Gasoline prices surged 27.8% year-over-year from 22.8% in August, as crude oil reached its highest level since May.
Grocery store prices rose 1.7% year-over-year, the slowest pace since May 2024, down from 2.8% in August.
Shelter inflation ticked to 1.8% from 1.5%, driven by fuel oil costs and higher homeowners’ insurance premiums.
The Bank of Canada’s preferred core gauges — CPI-trim and CPI-median — averaged 1.9% year-over-year, slipping below August’s 2.0% and below the Bank’s own 2% inflation target.
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