Canada’s annual inflation cooled to 2.2% in October, helped by cheaper gasoline, slower grocery inflation and the first sub-3% reading for mortgage interest costs in more than three years, Statistics Canada said Monday.

On a month-over-month basis, CPI rose 0.2%, matching forecasts. Economists had looked for 2.1% year over year and 0.2% month over month.

Carbon levy effect and underlying trend

The removal of this year’s carbon levy on gasoline continued to depress headline inflation. Ex-levy, annual CPI would have been 2.7% in October versus 2.9% in September, indicating underlying price growth is running a bit hotter than the headline suggests.

Gasoline prices fell 9.4% y/y (vs. –4.1% in September), the main drag on the basket.

Components: food eases, shelter mixed

• Food at stores: +3.4% y/y, down from 4.0%—still running ahead of headline CPI for a ninth straight month.
• Shelter: mixed. Mortgage interest costs +2.9% y/y (first sub-3% since mid-2021), while rent inflation >5%, accelerating for a second month.

Core inflation cools further

BoC-watched core measures softened again:

• CPI-median: 2.9% (from a revised 3.1%).
• CPI-trim: 3.0% (from 3.1%).

Policy takeaways and market reaction

The Bank of Canada, which cited stable inflation when it paused rate cuts last month, is likely to hold at 2.25% next month if disinflation persists, especially with core drifting lower and gasoline effects damping headline. Still-firm rent and above-headline food inflation argue for caution against declaring victory.

Markets took the print as modestly dovish: the Canadian dollar dipped ~0.07% to 1.4030 per USD (71.28¢), while 2-year GoC yields eased ~1.4 bps to 2.437%.