The latest inflation numbers are in, and they’re taking everyone by surprise! 📉 The market expected a 1.9% increase, but we’ve landed at 1.6%. What could this mean for interest rates in Canada? Let’s dive into the details and explore what’s next for the economy. Watch the video below for the full scoop!

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Video Transcript:

September’s inflation report here in Canada came in yesterday and it came in quite a bit below the market expectation. The market thought we would see a 1.9% inflation but the actual number is 1.6%. This is below the target of the bank of Canada. If it keeps pushing lower and gets below zero, that is really bad because that will usually stop people from buying and crash the economy.

The mantra of the bank of Canada is to keep inflation at about 2%. Obviously that has been difficult in the last couple of years since the COVID-19 pandemic, but it sure seems that we can look in the rearview mirror. Now the bank is stuck in the awkward spot of needing to spur the economy, and quickly!

Five weeks ago when the bank of Canada delivered it’s third consecutive quarter percent rate cut, it told us that it would be willing to cut interest rates more quickly if the data surprised on the downside of its forecasts, which is exactly what has happened.

The Bank expected GDP, which is the measure of the economy growth to increase in the third quarter of this year to 2.8%, but current estimates are that it actually slowed to 1.2%. This is a pretty big slowdown. It isnt only inflation dropping!

In spite of some recent good news on the jobs report and consumer spending, the big picture for hiring, consumption and investment still looks weak.

So between the weak outlook for economic growth, and lower than anticipated inflation, there is now about an 80% change of a half percent rate cut next week, and by Christmas time a 100% chance of at least three quarters of a percent reduction in rate from where we are today. Quite possibly we will see a full percent in rate cuts between now and Christmas.