The Bank of Canada still has a clear path to an interest rate cut, but now there is less pressure to go down that route.
The latest inflation numbers from Statistics Canada showed a 0.3% increase from September to October, with the annual average inflation rate holding steady at 1.9%. Core inflation edged up slightly to 2.1% in October from 2.0% in September. Core inflation, which is what the Bank of Canada watches, strips-out the cost of volatile items like food and fuel. Mortgage interest costs and car insurance were two of the big drivers of inflation last month.
The other key influencer of Canadian interest rates also appears to have stabilized. The U.S. Federal Reserve says it does not expect to be dropping its benchmark rate again this year.
At the end of last month the Fed trimmed another quarter point off its policy rate dropping it into the range of 1.5% to 1.75%. The minutes of the Fed meetings – that were released at the same time – make it clear the Federal Open Market Committee (FOMC), which sets the rate, has little taste for further cuts. The U.S. central bank has dropped its rate three times in 2019.
The current president of the United States has been pushing for negative interest rates, a la Europe, but there is little evidence the tactic is getting the desired results there.