MONTREAL ― Canadian inflation is steady and close to the 2-per-cent mark policymakers want, but while the cost of gasoline has fallen sharply, the cost of shelter has been hitting uncomfortable highs.
Statistics Canada reported on Wednesday that the average cost of rental accommodation nationwide was 3.6 per cent higher in October than it was a year earlier.
“That’s the fastest annual increase in rental fees since 1991,” Bank of Montreal chief economist Doug Porter wrote in a client note.
Watch: What’s the solution to skyrocketing rents in Canada? Story continues below.
Renters aren’t the only ones feeling the pressure these days. Mortgage interest payments were the largest contributor to the rise in consumer prices this month, CIBC economist Royce Mendes noted.
Home loan interest payments rose 7 per cent in the 12 months leading up to October, helping to explain a spike in the number of consumers going bust over that time, but Mendes sees some relief on the horizon thanks to falling interest rates earlier this year.
“There should be a slight offset coming from mortgage interest costs,” he wrote in a client note.
But thanks to falling prices in other categories — particularly gasoline, which is 6.7 per cent cheaper than a year ago — Canada’s overall inflation rate hasn’t moved much. Prices are 1.9 per cent higher than a year ago, the same reading as last month.
“Even at 1.9 per cent, Canada continues to post one of the higher inflation rates among advanced economies,” Porter noted.
That’s why Canada also has among the highest interest rates in the developed world today — and experts say with inflation running this strong, that’s unlikely to change.
Inflation is “one reason the (Bank of Canada) hasn’t been as eager to provide (interest) rate cuts similar to those seen in the U.S.,” Mendes wrote. “But if growth numbers continue to disappoint, there could still be a Canadian rate cut coming in the new year.”