Canada’s inflation rate has risen for the second month in a row, hitting 4% in August, primarily due to high food and gasoline prices. Statistics Canada’s consumer price index (CPI) released this data on Tuesday, sparking speculation about the Bank of Canada’s potential interest rate increase in October.
On Tuesday, Tu Nguyen, an economist with RSM Canada, suggested that this unexpected inflation report could lead to reconsideration of another rate hike. He cautioned that if September’s CPI report also shows high inflation, an October rate hike could become more likely, potentially pushing the economy towards a recession.
Despite these speculations, some experts believe that the Bank of Canada may maintain its current stance. Carlos Capistran, head of Canada and Mexico economics at Bank of America, opined that despite the surprising core inflation data, the bank may hold off on further rate hikes for now. However, he did not rule out another hike in future based on upcoming inflation figures.
The Bank of Canada is set to make its next interest rate decision on October 26, following a decision to maintain rates at 5% earlier this month. While some experts predict another interest rate hike in response to Tuesday’s inflation data, others suggest that rates may remain stable if the economy continues to be sluggish.
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