The jump in both headline and core inflation increased last month. The core rate of 2.2 per cent rose above the Bank of Canada's 2 per cent target for the first time since February, 2020, and was the biggest year-over-year gain since December, 2008. Here's a selection of economists' comments on Friday's inflation numbers:
"[I]’s not all about fuel and food, as core is creeping higher. That’s a theme in much of the industrialized world, despite hefty output gaps (less so in Canada). While this result doesn’t completely rule out BoC rate cuts, it relegates them to only the most extreme circumstance. Moreover, if core stays close to this level - let alone rises further - the BoC may return to the tightening wheel sooner than most now expect, especially if financial markets stabilize. It will be increasingly tough to justify ultra-low 1 per cent overnight interest rates with core CPI holding above 2 per cent and headline inflation running through the target range at above 3 per cent."
-- Douglass Porter, BMO Nesbitt Burns
"Although core CPI inflation is now likely to remain somewhat above the Bank of Canada's inflation target for now, we still believe the Bank will refrain from removing any further monetary stimulus for the foreseeable future."
-- David Madani, Capital Economics
"With external risks still elevated, the Bank of Canada won’t be moved to hike rates by today’s single data point. However, the hot inflation reading certainly diminishes the likelihood of a rate cut in the near term."
-- Emanuella Enenajor, CIBC World Markets
"While this report features some new elements compared to last month, the higher price pressure is not broadly-based. As such, this does not represent a major change in Canada’s inflation picture. While headline inflation has been creeping up over the last three months, underlying price growth remains quite level and wage pressure benign. .... Look for the Bank of Canada to wait until early 2013 before it switches its interest rate to a more aggressive inflation-fighting mode."
-- Jacques Marcil, TD Economics
"But the point remains that near-term inflation readings are set on the backburner by a central bank that is pursuing price level targeting in a de facto sense anyway. The BoC is not doing so explicitly as its current inflation targeting mandate affords plenty of flexibility, but when Governor Carney reiterates that the BoC has allowed achieving its inflation target to vary over time horizons stretching from two to twelve quarters, the implication is that the current inflation targeting mandate gives the BoC plenty of latitude toward looking through near-term inflation readings that it can’t influence anyway. That leaves it primarily focused upon a growth bias and financial stability concerns as it remains on the sidelines throughout the next year."
-- Derek Holt and Karen Cordes Woods, Scotia Capital
"Governor Carney has repeated that the 2 per cent target was an objective over the next several quarters, and that short term deviations would not get the Bank to apply mechanical rules. Price pressures appear to be temporary in nature. The price of autos and clothing could moderate in coming months, similar to what we saw in the US in September. Moreover, there are just too many risk factors, primarily external, that threaten to derail Canadian economic growth. We continue to expect the BoC to resume rate hikes after the middle of next year."
-- Krishen Rangasamy, National Bank