October's CPI Is Further Reason For Keeping Bank of Canada On The Sidelines In December, Says BMO

09:56 AM EST, 11/17/2025 (MT Newswires) -- Canadian consumer prices rose 0.2% month over month in October, or just 0.1% month over month in seasonally adjusted (SA) terms, cool enough to clip the headline inflation rate two ticks to 2.2% year over year, said Bank of Montreal (BMO).

However, the details were a tad disappointing, as lower gasoline and food prices were a big reason for the moderation, while many underlying prices ticked up, noted the bank. For example, the old measure of core - prices excluding food & energy - rose 0.3% month over month on an adjusted basis, boosting the yearly rate three full ticks to 2.7% year over year.

A pop in cellular services was a big driver there, stated the bank. In fact, the 7.9% year-over-year rise in all telephone services was the largest yearly rise since 1982.

Still, a pullback in grocery prices, perhaps in part courtesy of the rollback in retaliatory tariffs, helped moderate the Bank of Canada's core measures. Median prices edged up just 0.1% month over month (SA), trimming the annual rate to 2.9%, while trim eased a tick to 3.0% year over year.

The primary factor behind the dip in headline inflation was a 4.8% month-over-month drop in gasoline prices, which cut them 9.4% from a year ago. A 0.6% month-over-month pullback in grocery prices helped. While food costs often dip in October, this one was larger than normal, shaving the yearly rise to 3.4% from 4.0%.

On the flip side, rent perked up again to 5.2% year over year from 4.8%, and remains the single biggest driver of inflation due to its heavy weight in the index.

Also keeping a burner on underlying inflation, besides cell phone charges, were insurance costs. Home insurance spiked to 6.8% year over year, rising back close to the average increase of 7.5% in each of the past three years - now that's inflation, added BMO. Vehicle insurance is rising even more quickly at 7.3% year over year after an 8.1% rise last year.

Finally, October is the month that annual property tax increases are captured, and this year saw another "meaty" 5.6% rise, on top of last year's 30-year high of 6.0%.

On the surface, this looks to be a mildly friendly report with headline and median inflation rates dipping, pointed out BMO. However, the sources of relief were well-known ahead of time, and the new news here isn't great, driven by persistent strength in insurance costs and a snap higher in cell charges.

Overall, this does little to change the BoC's view that underlying inflation remains close to 2.5%, but, if anything, most underlying metrics have been stuck a bit above that, or have just crept up there. In other words, this report is just another reason to believe the BoC is moving to the sidelines in December, according to BMO.

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