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OTTAWA — Canada’s inflation rate rose again to 2 per cent in October, slightly shifting expectations for a quarter-percentage-point rate cut next month.

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Statistics Canada’s report on Tuesday said prices in October rose at a faster annual pace in five of the eight major components of the consumer price index.

A major driver of the increase in global inflation was the price of gasoline, which fell to a lesser extent in October compared to September.

“The supplement is not a big surprise, as the combination of higher gas prices, an annual increase in property taxes and a tough comparable from a year ago drove the temporary increase. Still, the report is a bit hotter than anticipated,” BMO Chief Economist Douglas Porter wrote in a note to clients.

With inflation back around the Bank of Canada’s 2% target, the central bank is still expected to continue cutting interest rates in the coming months, including in December.

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However, the size of the next interest rate cut will be determined by the central bank’s interpretation of economic data, including October’s inflation figures.

“Price pressures accelerated more than expected in October, representing a step back for the Bank of Canada but following a string of reports that were steps forward,” CIBC senior economist Katherine Judge wrote in a customer note.

The Bank of Canada cut its key interest rate by half a percentage point last month in response to lower inflation. But he had acknowledged that price growth was likely to pick up after falling to 1.6%, making Tuesday’s report less surprising.

Forecasters expecting a quarter-point cut say Tuesday’s report solidifies that prediction.

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“This tough outcome should take more energy out of the call for another 50 basis point interest rate cut from the Bank of Canada in December. We’ve been in the 25 basis point camp from the beginning and this report only reinforces that expectation,” Porter said.

The central bank’s key interest rate is currently 3.75%.

The Bank of Canada will also have new gross domestic product data to consider as well as the November jobs report ahead of its Dec. 11 announcement.

The central bank’s interest rate cuts have helped ease pressure on shelter-price inflation as mortgage interest costs fall.

Pressure on the rental market also eased, with rents up 7.3% from a year ago, down from an 8.2% annual gain in September.

Property taxes and other special taxes rose at their fastest annual pace since 1992, rising six percent from a year ago. This was up from an annual increase of 4.9% in October 2023.

Meanwhile, food prices rose faster last month, rising 2.7 percent from a year ago.

The Bank of Canada’s preferred core inflation measures, which exclude volatile prices, returned last month.

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