Canadian CPI Slows Annually but Gains Month-On-Month
Statistics Canada’s figures revealed that inflation over the past 12 months is now at its lowest since April, and this data will give the Bank of Canada food for thought when it makes its next interest rate decision next week on 26 October. Despite the annualized decline, the monthly data showed a small increase of 0.1% when a decline of 0.1% had been expected, although the differential was seen as marginal by the markets.
The last rate meeting resulted in a 0.75% rise to 3.25%.
The Bank of Canada said recently that the US Federal Reserve’s hawkish interest rate policy has continued to bolster the greenback, which could force its own interest rates to be higher.
Sentiment from Canadian firms has softened according to the Bank of Canada’s latest
Business Outlook Survey for the third quarter of this year.
Many believe that continued rising interest rates will result in slower sales growth, and inflation expectations remain high.
As anticipated by analysts, lower gasoline prices were the main reason for the latest deceleration in prices.
A drop of 7.4% was found in September for gasoline following a deeper fall of 9.6% in August, a monthly increase in the global supply of crude oil was also credited for the price drop.
Year on year gasoline has still risen by 13.2%, but this slowed down significantly from the August annual figure of 22.1% for fuel.
Canadian Food Prices Skyrocket, Mixed Market News
There was depressing news over food prices, which have risen at 11.4% year on year in September, at its fastest rate since August 1981.
Costs for fertilizers and natural gas were the main drivers for the food price hikes, where the Ukraine situation has also been a primary factor in the increases.
The S&P/TSX Composite index reacted positively to the inflation data, as it rose by 0.95% within an hour of the announcement of the data.
Canada’s 2-year government bond yield jumped to 4.15%, continuing its steep climb throughout this year, as more interest rate rises are feared.
The Canadian Dollar was little affected.
UK Annualised Inflation Increases to 10.1%
The UK’s latest inflation figures revealed a reverse of the trend found in Canada, with an annualised rate in September of 10.1%, in comparison to 9.9% in August, leaving the Bank of England likely to increase interest rates at its next meeting on 3 November.
Modelled estimates from the Office of National Statistics highlighted the issues that UK consumers are facing, as prices are now rising faster than at any time over the past forty years.
Rising food prices made the biggest contribution to the rising prices, which was offset by falling petrol prices at the pump.
The GBP/USD currency pair fell by 0.89%.
Prices in New Zealand Remain High
Data from New Zealand Tuesday showed annualised inflation remained stubbornly high at 7.2% as prices increased by 2.2% in the last quarter, meaning the CPI barely changed from the 7.3% of the second quarter.
Food was mainly responsible for keeping prices higher.
This came after there were influential opinions that the CPI would decrease, such as from the Reserve Bank of New Zealand (RBNZ), who predicted that annual inflation would drop to 6.4%.
After six consecutive 0.50% rate rises starting in February this year, the Official Cash Rate is almost certain to be increased from its current 3.5% level next month.