News & Resources

Market Analysis

Latest Insights
Press Releases
Latest Insights

Market Wire
Canadian Inflation Hits 19-Year High, Loonie Drops

by Karl Schamotta | November 17, 2021

Canadian prices climbed 4.7 percent on a year-over-year basis in October – matching market forecasts and keeping expectations for Bank of Canada rate hikes largely intact. Data released by Statistics Canada this morning showed the Consumer Price Index rising at the fastest rate recorded since 2003, meeting market expectations precisely. The index rose 0.7 percent in the month, jumping from September’s 0.2 percent increase.

Increases were broad-based: Gains were recorded in all major categories, with passenger vehicles becoming 6.1 percent more expensive, food up 3.8 percent, and shelter costs up 4.8 percent.

Housing costs continued to climb: The homeowners’ replacement cost index – a proxy for new home prices – rose 13.5 percent, matching last month’s gain as the largest yearly increase since the eighties, while the other owned accommodation expenses index, which includes commission fees on the sale of real estate, climbed 13.8 percent year-over-year. Mortgage interest costs fell 0.3 percent.

Yet energy prices drove much of the headline gain: A 25.5 percent year-over-year increase in energy prices pushed transportation costs up by 10.1 percent. Gasoline prices climbed 41.7 percent.

With volatile components extracted, price growth was more restrained: Core inflation, computed as the average of the three price measures preferred by the Bank of Canada (trim, median, and common), increased an annualized 2.67 percent, unchanged from September’s level. Core measures strip out highly-volatile categories, and are often used to develop a better understanding of price pressures in the underlying domestic economy.

Monetary tightening is likely: With price increases topping the Bank of Canada’s target for seven months running, markets expect policymakers to hike at least five times over the next twelve months.

But markets are disappointed: The Canadian dollar fell almost 50 basis points on the release, suggesting that traders were prepared for a consensus-busting headline number above the 4.7 percent mark.

And it’s important to note that price pressures are global: Earlier this morning, the United Kingdom’s Office for National Statistics said year-over-year inflation hit 4.2 percent in October, blowing past already-aggressive market expectations at 3.9 percent. Final numbers for core euro area inflation hit 2 percent in the same month – a 19-year high, by our reckoning.

The Bank of Canada can’t stop the tide: Changes in domestic monetary policy – although arguably important for signalling reasons – won’t alleviate inflation pressures that are global in nature. Ebbing supply chain issues, falling commodity prices, and lower levels of fiscal support are likely to prove more important over the year ahead.

“Cambridge Global Payments” is a trade name, which in this document refers specifically to one or more of these legal entities: Cambridge Mercantile Corp., Cambridge Mercantile Corp. (U.S.A.), Cambridge Mercantile Corp. (Nevada), Cambridge Mercantile (Australia) Pty. Ltd.

Cambridge Global Payments (“Cambridge”) provides this document as general market information subject to: Cambridge’s copyright, and all contract terms in place, if any, between you and the Cambridge entity you have contracted with. This document is based on sources Cambridge considers reliable, but without independent verification. Cambridge makes no guarantee of its accuracy or completeness. Cambridge is not responsible for any errors in or related to the document, or for damages arising out of any person’s reliance upon this information. All charts or graphs are from publicly available sources or proprietary data. The information in this document is subject to sudden change without notice.

Cambridge may sell to you and/or buy from you foreign exchange instruments (including spot and/or derivative transactions; both kinds are here called “FXI”s) covered by Cambridge on a principal basis.

This document is NOT: 1) Advice of any kind, or 2) Approved or reviewed by any regulatory authority, or 3) An offer to sell or a solicitation of an offer to buy any FXIs, or to participate in any trading strategy.

Before acting on this document, you must consider the appropriateness of the information, based on your objectives, needs and finances. For advice, you must contact someone independent of Cambridge.

Certain FXIs mentioned in this document may be ineligible for sale in some locations, and/or unsuitable for you. Contact your Cambridge representative for further information regarding product availability/suitability before you enter into any FXI contract.

FXIs are volatile and may cause losses. Past performance of a FXI product cannot be relied on to determine future performance.

This document is intended only for persons in Canada, the US, and Australia. This document is not intended for persons in the UK or elsewhere in the EEA. In Australia, this publication has been distributed by Cambridge Mercantile (Australia) Pty. Ltd. (ABN 85 126 642 448, AFSL 351278); for the general information of its customers (as defined in the Corporations Act 2001). This entity makes no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law.

Fees may be earned by Cambridge (and its agents) in respect of any business transacted with Cambridge.

The document is intended to be distributed in its entirety. Unless governing law permits otherwise, you must contact the applicable Cambridge if you wish to use Cambridge services to enter a transaction involving any instrument mentioned in this document.

© Copyright 2018, Cambridge Mercantile Corp., ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Cambridge Mercantile Corp. See for contact details.