At CIBC Capital Markets, senior economist Andrew Grantham said that while headline CPI accelerated by more than expected, “core measures of inflation were just subdued enough to support a further 25-basis-point cut.” He noted that weak GDP growth and sluggish business sentiment strengthen the case for additional easing.
Doug Porter, chief economist at BMO Economics, described the inflation surprise as making the BoC’s decision “a bit more interesting next week than previously expected.” He said that while his team remains on the dovish side, “given today’s setback for core, we’ll stay there for now,” suggesting the data might delay rather than derail another rate cut.
Charles St-Arnaud, chief economist at Alberta Central, said signs of “stickier than expected” inflation could raise concerns for policymakers but added that “growth is expected to be subdued” and that his base case still assumes a 25-basis-point reduction.
Royce Mendes of Desjardins Capital Markets said that after a review of the data, “a few volatile categories drove the headline surprise.” Given the BoC’s focus on underlying inflation, he said central bankers “will choose to cut rates again next week,” citing continued economic weakness.
Abbey Xu of RBC Economics said inflation “continues to run above the Bank of Canada’s 2% target, but that was also true when the central bank cut the overnight rate in September.” She expects one more cut next week, which would leave the overnight rate at 2.25%, the lower end of the BoC’s neutral range.