Canada's CPI in Line With Expectations But Underlying Inflation Suggests Further Cooling, Says Desjardins

09:25 AM EST, 11/17/2025 (MT Newswires) -- Canadian headline inflation slowed to 2.2% year over year in October from 2.4% in September, said Desjarins after Monday's consumer price index data.

Most of that slowdown was driven by energy prices, noted the bank. However, there were some pockets of strength.

Excluding food and energy, inflation rose 0.26% in seasonally adjusted terms over the month, pushing the year-over-year rate up to 2.7% from 2.4%. Most of that strength was concentrated in communication services, with sharp increases in cellphone and postal services.

Rented accommodation also rose 0.9%, posting the largest monthly increase since August of last year. As a result, core services rose over 0.5% in October, leaving the annual rate tracking just above 3%. That's in contrast to goods prices, which continued to normalize over the month despite a rebound in auto prices.

Other measures of core inflation suggest that underlying inflation isn't picking up, stated Desjardins. The Bank of Canada's preferred core measures of inflation fell in year-over-year terms to 3.0% from 3.1% in September. The average three-month annualized rates of these measures also slowed to 2.6% from 2.7%.

The distribution of price growth shifted lower, with the share of components growing more than 3% declining slightly to 38%. In addition, the share of components falling by greater than 1% rose over the month.

While there were plenty of moving parts in Monday's data, the underlying trend in inflation continues to suggest limited cause for concern, pointed out the bank. Rent prices are rising and that's puzzling, but the BoC is likely to look through that strength.

Pockets of strength within services are also coming from volatile components, which central bankers are likely to put less stock in.

Desjardins continues to see Canada's central bank on hold for the next year, but it will be closely watching incoming activity data for signs of further weakness in the Canadian economy.

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