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Analysts at TD Securities note that Canada’s CPI inflation held steady at 1.9% y/y in September, falling short of the market consensus (2.1%) and TD’s forecast (2.0%) for a slight pickup from August.

Key Quotes

“Notably, this was the first downside surprise since November 2018. Prices fell by 0.4% on the month, owing to an outsized correction in airfares (-19%) that shaved roughly 0.3pp from the headline index despite their 1.5% index weight.”

“The narrative from a 0.2pp miss on the headline print was clouded by stronger core CPI, with all three of the Bank’s preferred measures pushing higher by 0.1pp. This pushed the average of the three back to 2.07% y/y, which sits just below the seven year high (2.10%) from May.”

“The downside miss on headline CPI won’t phase the BoC – they had forecast Q3 inflation at 1.6% y/y in the July MPR, so today’s data still represents an upside surprise of 0.3 p.p. relative to their forecast for Q3 as a whole.”