By Ketki Saxena
Investing.com -- Tomorrow morning, Statistics Canada will release the Consumer Price Index (CPI) reading for October.
In September, the CPI rose 6.9% from a year earlier, higher than economists’ average expectation for a 6.7% increase.
Looking ahead, economists expect CPI to remain elevated, driven by higher fuel costs which have been a defining metric in the inflation story so far this year. in October. gasoline prices increased to US$1.23 per litre in October, up from US$1.18 per litre in September.
Nathan Janzen, senior economist at Royal Bank of Canada (TSX:RY), believes that tomorrow’s reading will show a “resurgence in gas and fuel oil prices,” a decrease in which “had been the main factor pulling overall CPI growth readings lower” in recent months.
Andrew Grantham, senior economist at CIBC (TSX:CM) Capital Markets, also believes fuel prices will be key to inflation tomorrow and going forward. Grantham notes that “Unless gasoline prices start to turn back down again, headline inflation could well accelerate further in November as well”.
Ksenia Bushmeneva, economist at TD Bank (TSX:TD) notes that the recent blockbuster labour market report, which has continued to support consumer spending, will add further pressure to inflation. Bushmeneva further writes that the Bank of Canada’s recent rate hike spree will not yet have worked to significantly curb inflation.
“Monetary policy works with lags, as such we are only starting to see the impact on real economic activity. “
Looking ahead, Bushmeneva expects that “The full cumulative effect of higher interest rates on consumers will materialize only toward the end of 2023”. It is only at this stage that “a significant share of borrowers have been exposed to higher rates either due to mortgage renewals or higher rates on new credit. “