With Canada’s interest rates temporarily on hold, what is the central bank’s next move?
Measures of so-called “core inflation,” which the Bank of Canada watches closely, also cooled in October.
But Leslie Preston, managing director and senior economist at TD Bank, said in a note Tuesday morning that the central bank will need to see “further progress” before it can be confident inflation will return all the way back down to two per cent.
Katherine Judge, director and senior economist at CIBC Capital Markets, meanwhile said in a note Tuesday that price increases are becoming “more concentrated,” particularly in mortgage pain driven by the central bank’s own rate hikes.
Judge said that October’s inflation report, combined with signs of weakening elsewhere in the economy, should be enough to keep the Bank of Canada on hold in December, with rate cuts potentially beginning in the second quarter of next year.
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Preston said she believes the weakening economy will help to “dampen” price pressures, but added “tightness” in the jobs market means the process could take longer.
The central bank’s policymakers will see one more Labour Force Survey from StatCan before its next rate decision on Dec. 6.
Bank of Canada governor Tiff Macklem will speak to reporters in Saint John, N.B., on Wednesday.