Canadian inflation slows to 2.2 percent in September

Canadian inflation slows to 2.2 percent in September

Statscan showed gasoline prices had increased by 12.0 per cent over September 2017, down from the 19.9 per cent year-over-year jump in August.

Economists had expected the September figure to come in at 2.7 per cent, according to Thomson Reuters Eikon. The 2% core rate is consistent with an economy at full capacity - but not one that is overheating and that should give the Bank of Canada scope to proceed with gradual interest-rate increases.

The central bank is widely expected to raise its key interest rate target, which sits at 1.5 percent, by a quarter of a percentage point.

"Beyond next week, we see two more hikes in the first half of 2019", said Paul Ferley, assistant chief economist at the Royal Bank of Canada. "We have mortgage rates that have been increasing and will continue to increase even with very little action from the Bank of Canada".

Canada's consumer price inflation decelerated in the month of September, coming in below consensus expectations.

Inflation had hit 3% in July - the highest in seven years - on the back of gasoline and a jump in prices for air transportation and other travel-related services.

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The deceleration in the headline rate was mainly driven by transportation prices, which alleviated to 3.9 percent from August's 7.2 percent. The cost of air transportation fell by 16.6 per cent from a year earlier.

"All of these soft sectors combined to clip core inflation as well, although the easing there was much less dramatic than in the headline tally", Porter said. Core measures of inflation - considered a better indicator of underlying pressures - also ticked lower and averaged 2 percent last month.

For the first time in six months, clothing stores saw a decrease in sales of -1.1 per cent.

Motor vehicle and parts dealers experienced a gain of 0.8 per cent in August - the first time in three months - because of higher sales at new auto dealers and at automotive parts, accessories, and tire stores to a lesser extent.

Data released Friday indicates that retail sales declined to $50.8 billion following a 0.2 per cent increase in July.

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