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While the easing pace of the cost of living may bring some relief to Canadians, the big question for market watchers is: are the August numbers enough to cause the Bank of Canada to reconsider its rate hiking path?Leslie Preston, managing director & senior economist, TD Economics “A journey of a thousand miles starts with a single step. Canadian inflation took a single step in the right direction in August, but it still has a long way to go. The Bank of Canada core measures of inflation remain more than two percentage points from the target range of one to three per cent. The BoC has hiked interest rates 300 basis points so far this year, and the impact of that is starting to be felt in the economy.
we expect the BoC to continue hiking its policy rate at the end of October, and take the policy rate to 4% by the end of the year”Article content“The larger-than-expected falls in headline and core inflation in August lend some support to our forecast that the, particularly with the labour market also weakening in recent months. Headline inflation is admittedly still far too high at seven per cent, but that was at least lower than the 7.3 per cent consensus forecast.
we are doubtful that the Bank will hike its policy rate to more than 4 per cent, from the current 3.25 per cent, as markets are currently pricing in.