Inflation ticked up to 2% in October after previous month's steep drop in gas prices

Canada's inflation rate ticked upto twoper cent in October,Statistics Canada said on Tuesday. The consumer price index had previously hit 1.6 per cent in September, thanks to a steep decline in gas prices.

Gas prices fell again in October, although to a lesser extent and with gasoline excluded, all-itemsinflation came in at 2.2 per cent, the same as in September and August.

October's uptick marks the first time that the annualinflation ratehas increased since May, although this was largely expected after the previous month's sharper-than-expected drop.

Grocery inflation rose at a faster pace in October compared to the same timea year before, outpacing overall inflation for the third month in a row. Higher prices for fresh vegetables and preserved fruit contributed to this trend.

Shelter inflation also cooled to 4.8 per cent on a yearly basis in Octoberas mortgage interestcosts and rents grew at a slower pace.

While rent inflation has slowed, rent prices continue to rise, having increased 21.6 per cent compared to October 2021.

Property taxesalso drove headline inflation up, withthe highest yearly increase since 1992, rising sixper cent compared to a 4.3 per cent increase during the same period a year before. Prices increased the most in Newfoundland and Labradorand British Columbia.

Central bank likely to cut rates, but by how much?

The Bank of Canada made a cut of 50 basis points last month, twice the size of its last few cuts, taking a victory lap after August inflation hit the central bank's longstanding two per cent target.

At that time, governor Tiff Macklem said to expect more rate cuts if the economy continuesto evolve broadly in line with the bank's forecast.

But he also warned that the timing and pace of cuts would depend on incoming economic data and its potential impact on the bank's inflation outlook.

"Given that this report follows a string of better news on inflation, and the fact that the GDP and employment data remain to be seen ahead of the December [Bank of Canada] decision, we still see a 50 [basis-point]cut as possible at the next BoC meeting," wrote Katherine Judge, an economist at CIBC.

Other analysts said the central bank will likely make a smaller cut at its next meeting on Dec. 11. BMO economist Doug Porter wrote that "at this point, most signs suggest the prudent course of action is a 25 [basis-point] rate cut path."