Economists expect inflation continued its downward trend last month, giving the Bank of Canada the all-clear to continue cutting its benchmark interest rate.
“We are looking for headline inflation to cool below the bank’s two-per-cent target in September,” said BMO economist Shelly Kaushik.
TD Bank senior economist James Orlando said he sees headline inflation slowing to 1.9 per cent in September, with core measures of inflation remaining above two per cent.In August, inflation hit the Bank of Canada’s two-per-cent target, falling from 2.5 per cent year-over-year in July to reach its lowest level since February 2021. Lower gasoline prices underpinned the decline.
“It takes time for market rate changes to impact five-year, fixed-rate mortgage payments through renewals, and so you'll still have further increases in mortgage costs. But they are getting smaller,” said Janzen, who also sees headline inflation hitting 1.8 per cent in September. However, the labour market was surprisingly stronger in September, adding more than twice as many jobs as in August, while the unemployment rate ticked lower to 6.5 per cent.
Some think the central bank could take a more aggressive tack — Janzen sees two larger-sized cuts of half a percentage point each in October and December, even after Friday’s jobs report.
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