Desjardins Sees Limited Inflation Pressure Despite Canada's 2.4% CPI Gain

09:43 AM EDT, 10/21/2025 (MT Newswires) -- Canadian headline inflation accelerated to 2.4% year over year from 1.9% in August, the quickest pace of advance since February, said Desjardins.

Both gasoline and food prices rose sharply during the month. But excluding those two volatile categories, prices were up just 0.19% in seasonally-adjusted terms, leaving the three-month annualized and year-over-year rates at 1.6% and 2.4%, respectively.

Other measures of core inflation also suggest that underlying inflation isn't heating up, stated Desjardins. While the Bank of Canada's preferred core measures of inflation rose in year-over-year terms, that was largely due to base effects.

The month-over-month readings for both CPI-trim and CPI-median weren't far off from the growth seen in the prior month and the three-month annualized rates of those two metrics averaged 2.70% in September, up just modestly from the 2.61% seen in August.

In addition, the distribution of price growth actually shifted somewhat lower. The share of categories with annual growth above 3% declined slightly to 39.5% from 41.0% in August, while the share of categories with price growth of less than 1% increased to 36.6% from 35.6%. Measures of both core goods and core services prices also suggest that underlying inflation remains in check.

After a careful review of the data, it looks like a few volatile categories drove the headline surprise, added the bank. Given the BoC's focus on underlying inflation, Desjardins believes that central bankers will choose to cut rates again on Oct. 29.

While there might be scope for debate about inflation, there should be no disagreement that the economy is weak and in need of support, according to Desjardins.

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