Canadian Consumer Price Index (October 2025)

Inflation comes in as expected, as underlying inflation measures offer mixed signals 

• Headline CPI inflation for October came in at 2.2% year-on-year (y/y), right in line expectations for a 2.2% y/y print – decelerating from September's 2.4% print. 
• Gasoline prices were the big drag on the headline, falling 9.4% compared to the 4.1% decline in September. On a monthly basis, prices tumbled 4.8%, amid the switch to cheaper winter blends and ongoing worries over a global oversupply in oil markets.
• Grocery price inflation slowed in October, with prices up 3.4% y/y, down from 4.0% in September. The slight deceleration offers little relief as Statistics Canada notes that grocery prices, "have exceeded overall inflation for nine consecutive months." On a monthly basis grocery prices fell 0.6% month-on-month.
• The Bank of Canada's various of measures of underlying inflation was a mixed bag for the month. Both of the Bank of Canada's (BoC) constructed core measures came in below expectations as the CPI-trim measure fell to 3.0% y/y (3.1% in September), while the CPI-median index tumbled to 2.9% y/y from 3.1% in September. 
  
  • On the flip side, the older exclusionary measures showed a different picture, with both heating up for the month. The CPI excluding food and energy jumped to 2.7% y/y from 2.4% in September, and the CPI excluding the eight most volatile components and indirect taxes (CPIX) rose to 2.9% y/y from 2.8% in August.
  • The story was the same on the three-month seasonally adjusted (annualized) basis as the CPIX and CPI ex. food and energy jumped to 3.3% and 2.6%, respectively, while the CPI-median (+2.6% from 2.8% in September) cooled and the CPI-trim was unchanged at 2.6%.

Key Implications

• The takeaway here is that top line inflation came in as expected while the various underlying measures continues to hover in-and-around the target range – with some heating up and others cooling off.
• The Bank of Canada delivered a cut at their past meeting and signaled there wasn't much more they could do in the current economic environment – a view we have shared for some time. This month's report doesn't change the story much, inflation is unlikely to fall below the lower end of the target range given the disruptions on the supply side of the economy, but it also unlikely to sharply accelerate amid expectations for tepid domestic demand. Markets remain on the same page, putting the odds of a cut by next April at roughly 30%. 

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