Canada’s October inflation report showed headline CPI easing to 2.2% y/y from September’s 2.4%, slightly above the 2.1% consensus forecast.

While the cooling was driven primarily by falling gasoline and grocery prices, persistent strength in core measures kept Bank of Canada (BOC) rate hold expectations firmly in place.

Here are the major points from the release:

Key Takeaways

• Headline CPI cooled to 2.2% y/y from 2.4% in September, missing the 2.1% consensus but supported by faster-declining gasoline prices
• Core inflation measures edged lower but remained elevated
  • CPI-trimmed is at 3.0%
  • CPI-median at 2.9%, down from 3.1% previously
• Monthly CPI rose 0.2%, matching expectations, while on a seasonally adjusted basis it increased 0.1%
• Gasoline prices fell 9.4% y/y, a sharper decline than September’s 4.1% drop, as drivers switched to cheaper winter blends and crude prices declined
• Grocery prices rose 3.4% y/y, down from 4.0% in September, marking nine consecutive months of food inflation exceeding headline CPI
• Cellular service prices surged 7.7% y/y, the first annual increase since April 2023, following price hikes from major carriers
• Home and auto insurance costs climbed sharply, up 6.8% and 7.3% respectively, with Alberta seeing the steepest increases
• Rent inflation accelerated to 5.2% from 4.8%, while mortgage interest costs rose 2.9% y/y, the first time below 3% in over three years

Link to official Statistics Canada Consumer Price Index (October 2025) 

Markets are now pricing in less than 5% odds of a BOC rate cut at the December 10 meeting, with most economists expecting rates to hold at 2.25% through 2026.

The Canadian dollar weakened modestly following the data release, with traders interpreting the mixed signals as confirmation that the BOC will remain on the sidelines at its December 10 meeting.

Market Reactions

Canadian Dollar vs. Major Currencies: 5-min

Overlay of CAD vs. Major Currencies Chart by TradingView

The Canadian dollar, which spent the hours before the release trading in ranges and taking cues from other currencies, slipped right after the cooler-than-expected inflation print.

The overall reaction stayed muted, though, likely because there were no fresh catalysts to price in and markets were already bracing for this week’s potential movers.

The subdued market reaction likely reflected traders’ view that the data changed little in the BOC outlook. While headline inflation cooled as expected, sticky core measures near 3% reinforced the central bank’s message that rates are “about the right level.” With gasoline and food driving most of the headline decline, underlying price pressures remained too elevated to justify further cuts.

Less than an hour after the CPI release, the Loonie was back to reacting to other themes, including speeches from FOMC members Waller and Jefferson.

CAD faced bearish pressure against safe havens like USD, CHF, JPY, and EUR around the London close, but it still managed to finish the day higher against most majors except the U.S. dollar.