Inflation in Canada rose by more than forecast and underlying price pressures reaccelerated, hiccups that may dissuade policymakers from a second straight 50 basis-point cut to interest rates next month.

The consumer price index rose 2% in October on a yearly basis, up from a 1.6% increase a month earlier, Statistics Canada reported Tuesday in Ottawa. That’s slightly faster than the median estimate of 1.9% in a Bloomberg survey of economists.

On a monthly basis, the index ticked up 0.4%, versus expectations for a 0.3% gain. It increased 0.3% on a seasonally adjusted basis.

The central bank’s two preferred core inflation measures also accelerated, averaging a 2.55% yearly pace, faster than expectations and up from 2.35% a month earlier. A three-month moving average of those measures rose to an annualized pace of 2.8%, from 2.1% in September, according to Bloomberg calculations.

The first acceleration of headline inflation in five months will likely bolster a stance for the Bank of Canada to reduce borrowing costs at a gradual pace, after officials stepped up the pace of easing in October with a half percentage point cut. The next and this year’s final rate decision is on Dec. 11.

Still, Tuesday’s inflation print probably won’t entirely eliminate bets for a bigger rate cuts. That’s because the central bank had already expected a bump along the road, with consumer prices hovering around 2%, as policymakers keep cutting rates to boost economic growth.

October’s price gains were also driven partly by short-term pressures including municipal property taxes — which rose by most since 1992 — and gas prices.

Excluding gasoline, the consumer price index rose 2.2%, matching the rate in August and September.

Shelter price growth continued to ease in October, rising 4.8%, compared with a 5.0% a month earlier. Both mortgage interest cost and rent grew at a slower pace. Excluding shelter costs, the index rose 0.9%, versus 0.4% in September.

Regionally, prices rose at a faster pace in October compared with September in all 10 provinces.

Source: National Post