Canada’s central bank is running out of excuses. Headline inflation surged in September, according to Statistics Canada’s (StatCan) latest Consumer Price Index (CPI). Rising headline inflation is certainly a concern, but it was dwarfed by what the agency omitted: the Bank of Canada’s (BoC) preferred core inflation metrics. The BoC recently floated the idea of abandoning them when the data failed to align with its messaging. Now with virtually all quantitative measures of inflation in conflict with the central bank’s narrative, it’s unclear what—if anything—is guiding Canadian monetary policy.
Canadian Headline Inflation Surges After Weaning Gas Influence
Source: StatCan.
Canadian headline inflation made a monster of a surge. CPI climbed 0.5 points to 2.4% in September, as gasoline’s temporary drag on headline inflation wears off. CPI ex-gasoline came in at 2.6% in September.
According to the agency, headline CPI was boosted by an acceleration in food (+3.8% y/y), rent (+4.8%), property taxes (+6.0%), and mortgage interest (+3.6%). The latter is an interesting point, as rate cuts have had the exact opposite effect most anticipated—the rate cuts are stoking inflation, boosting bond yields, and thus cheaper fixed-term mortgage rates. Then there’s credit crowding, but that’s a topic for another day.
Bank of Canada Core Inflation Measures Show Inflation Is Soaring
Notably absent from this month’s report was any mention of Core CPI—the BoC’s preferred inflation metrics that may no longer be preferred in the coming months. CPI-common rose 0.2 points to 2.7%, while CPI-median (+3.2%) and CPI-trim (+3.1%) both exceeded the BoC’s 3.0% upper tolerance.
The omission might normally go unnoticed, but it comes right after the BoC’s recent comments. Lacking supporting data for its last rate cut, the BoC questioned the reliability of the data. Instead, it stated it will be looking at underlying inflation, which they noted is a “feeling”—not a statistic.
After the most recent inflation release, hopefully, they realize the gut feeling was just gas and get back to the actual data.
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