Good morning. Bouncing gas prices and stubborn grocery costs will feed into today’s headline inflation report. But days ahead of the Bank of Canada’s next rate decision, Governor Tiff Macklem and Co. will be looking at the underlying trends – measures that strip out volatile swings to show where prices are truly heading. That’s in focus today.
Up first
In the news
Tariffs: A trade deal on steel, aluminum and energy could be ready for Prime Minister Mark Carney and U.S. President Donald Trump to sign at the Asia-Pacific Economic Cooperation summit later this month, The Globe is reporting.
Economy: Canada’s cabinet and furniture makers are warning of a “bloodbath” as Trump’s tariffs sink in.
Boardroom battles: Dye & Durham’s leadership turmoil is deepening as ex-CEO Matt Proud abandons his buyout bid and the company sues his investment firm.
Game on: The Toronto Blue Jays are headed to their first World Series in 32 years with 4-3 Game 7 ALCS win over the Seattle Mariners, thanks to a seventh-inning three-run blast by George Springer. The Jays meet the Los Angeles Dodgers for Game 1 at home on Friday.
Case closed.Illustration by Pep Montserrat
Law in order
From construction to M&A to white-collar crime, here are Canada’s best firms – the 20 top-ranked in 31 practice areas, as voted on by thousands of legal eagles across the country.
In focus
What lies beneath
When Statistics Canada reports its September inflation data this morning, most of the attention will go to the headline figure – the all-items Consumer Price Index, or CPI. That’s the broadest measure of price changes across the economy, and the one that tends to lead media coverage because it reflects what Canadians see day-to-day at the grocery store, the gas pump or the pharmacy.
The headline number captures every category in the CPI basket, from rent and energy to electronics and vegetables. It’s the simplest way to describe inflation’s impact on household budgets. But it can also be misleading: Volatile components like gasoline and travel can swing sharply month-to-month, obscuring whether underlying inflation pressures are truly easing.
That’s why the Bank of Canada focuses on measures designed to filter out month-to-month volatility. These include “CPI-trim” and “CPI-median,” two key indicators of underlying inflation.
- CPI-trim excludes the biggest outliers each month – roughly the top 20 per cent and bottom 20 per cent of price changes – and averages the rest.
- CPI-median identifies the midpoint of all monthly price changes across the basket in any given month.
But the bank also tracks a long list of CPI variants that strip out things like energy, food or taxes in ways the trim and median measures don’t. In all, more than a dozen gauges feed its view of how broad and persistent price pressures are, sliced across monthly, three-month, six-month and annual trends.
In a speech earlier this month, BoC deputy governor Rhys Mendes even said inflation’s growing volatility – driven by trade and geopolitical shocks – means the bank must cast a wider net of data to judge where prices are really heading.
No matter how many acronyms it ends up parsing, the bank is constantly reassessing how best to see the world through different lenses before making a decision.
What to watch today
Leading forecasts are similar, but the Bank of Montreal expects headline inflation to rise slightly above 2 per cent in September – the first reading over that threshold since March – before easing again in the months ahead.
“Big picture, there are still a few elements bringing inflation down,” said Shelly Kaushik, a senior economist at BMO. Those include the removal of Canadian countertariffs on U.S. goods and decelerating shelter costs as mortgage interest rates ease.
Today’s expected uptick mainly reflects a statistical mirage: Prices appear higher this year only because energy costs fell sharply a year ago, creating an unusually low comparison point. Lower fuel prices now are masking how much other costs are still rising.
The bank also considers indicators like its quarterly Business Outlook Survey. The latest report, released yesterday, showed firms still contending with tariff-related cost pressures – scaling back hiring and investment plans as demand softens.
Policymakers and market watchers are using all of these signals to “see beyond the headline,” Kaushik said in an interview. “It’s really about where underlying inflation is. It’s not one measure or even a couple of measures, but the overall direction that will tell us where the risks lie for the Bank of Canada as it debates whether to cut next week.”
The bigger picture
Markets are betting the Bank of Canada will cut its policy rate by a quarter-point next week, lowering it to 2.25 per cent. Swap prices – market trades that reflect where investors expect the bank’s benchmark rate to be after its next meeting – now imply roughly an 80-per-cent chance of a move, reflecting confidence among traders and bond investors that inflation has slowed enough for the bank to ease.
For homeowners with variable-rate mortgages, that means more relief is in sight. Fixed-rate borrowers will feel the impact more slowly since those loans track longer-term bond yields.
The even bigger picture
Market watchers will be glued to Friday’s U.S. inflation report, which lands days before the Federal Reserve’s policy meeting. A steady reading near 3.1 per cent for core inflation would reinforce expectations for a U.S. rate cut, though the Fed’s task is also delicate: easing borrowing costs to support growth without reigniting inflation. Donald Trump’s talk of scaling back tariffs is injecting new uncertainty into the inflation outlook, lowering expected import costs while complicating the path ahead for the Fed and the Bank of Canada.
But for most consumers, that would be a good problem for policymakers to have.
Charted
Whale, hello there
The critically endangered North Atlantic right whale population reached 384 last year – a 2-per-cent increase from 2023. New estimates released this morning by the North Atlantic Right Whale Consortium mark the fourth consecutive year of slow growth for the species.
Scientists are broadly positive about the trend, but caution that protective measures are needed to ensure an upward trajectory. “We don’t want to take our foot off the gas when it comes to management and conservation efforts,” said Heather Pettis of the New England Aquarium, who chairs the group.
The lookahead
Also on our radar today
Online: Amazon is facing questions over its cloud services unit after a widespread outage yesterday knocked out some of the world’s most popular apps and thousands of websites, disrupting businesses around the world.
On the phone: Apple is closing in on a $4-trillion valuation as data show strong demand for the iPhone 17.
At the bell: Domestic earnings include Waste Connections Inc. In the U.S., Netflix Inc., Northrop Grumman Corp., Halliburton Co. and Coca-Cola Co. headline a heavy day.
Morning update
Global markets searched for direction as traders eyed a possible easing in trade tensions between the U.S. and China and nerves over credit risks in the banking sector ebbed.
Wall Street futures were in negative territory after major U.S. indexes closed sharply higher yesterday. TSX futures followed sentiment lower.
Overseas, the pan-European STOXX 600 edged up 0.08 per cent in morning trading. Britain’s FTSE 100 gained 0.26 per cent, Germany’s DAX advanced 0.04 per cent and France’s CAC 40 climbed 0.35 per cent.
In Asia, Japan’s Nikkei closed 0.27 per cent higher, while Hong Kong’s Hang Seng advanced 0.67 per cent.
The Canadian dollar traded at 71.18 U.S. cents.