The Bank of Canada is widely expected to hold its key interest rate steady on Wednesday as the Canadian economy bends to higher interest rates and inflation resumes its downward trend.
The central bank held its key interest rate steady at five per cent last month but kept the door open to more rate hikes, citing concerns about the persistence of underlying price pressures.
The annual inflation rate rose in both July and August, while core measures of inflation — which strip out volatile prices — have not eased by much in recent months.
But the September consumer price index report helped quell some of those anxieties as the pace of price growth slowed across the economy and the annual inflation rate fell back to 3.8 per cent.
On the jobs front, employment continues to rise as Canada's population continues to surge, but the job market is not as robust as it was in 2022. Job vacancies have fallen and the unemployment rate has edged higher to 5.5 percent.
The pace of consumer spending has also slowed. New retail Canadian retail sales fell 0.1 per cent to $66.1 billion in August as sales at new and used car dealers fell for the month, Statistics Canada said Friday.
These trends are expected to continue as the effect of previous rate hikes take hold on the economy, pinching the pocketbooks of more Canadians and businesses.
In particular, as more households renew their mortgages, the effect of higher interest rates is expected to weigh on more people.