Upside Surprise to CPI in Canada, But Details Less Dire, Says Rosenberg Research

08:33 AM EDT, 10/22/2025 (MT Newswires) -- Not one of the more encouraging inflation reports in Canada, with the consumer price index coming in at 0.1% month over month non-seasonally adjusted in September versus the 0.1% consensus decline expectation -- that is a considerably large miss, said Rosenberg Research.

The year-over-year headline inflation rate jumped to 2.4% from 1.9% in August, which also topped consensus views of a 2.2% pace, noted Rosenberg Research. The median core year-over-year price trend stayed at 3.2% (August revised a tad higher from 3.1%) and that too came in just above market expectations of 3.0%.

The seasonally-adjusted CPI leapt 0.4% month over month in September and broke a six-month string of tame numbers -- it's the second strongest impulse since August 2023, pointed out Rosenberg.

If there was any comfort, it was that the bulge was centered largely in food and energy, because the core index actually came in below 0.2% month over month for the fourth straight month and the year-over-year remained steady at 2.4%, added Rosenberg.

Shelter costs are cooling off (0.1% month over month for the second month in a row), but stripping this out reveals an inflation rate of 2.2% year over year, which isn't really far off the mid-point of the Bank of Canada target. The median core CPI also came in at 0.2%, as it has in four of the past five months, and the trimmed-mean measure also came in at 0.2% sequentially for the fifth month running.

The reaction in the Government of Canada (GoC) bond market on Tuesday, including the front end, as well as the Canadian dollar (CAD or loonie), was "fairly muted" -- which makes sense since this was a less sinister report than the headline suggested, according to Rosenberg.

The swaps market has taken down the odds of an Oct. 29 BoC rate cut to 65% from 76% and has priced in less than one 25bps reuction by the end of the year, from more than 100% conviction before Tuesay's data release -- now that is an over-reaction given what the economy, labor market, wage trends, and business inflation expectations are doing, said Rosenberg.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.