By Promit Mukherjee
OTTAWA (Reuters) -Canada's annual inflation rate increased to 2.4% in September, mainly led by a smaller decline in gasoline prices on a yearly basis when compared with the previous month and a rise in food prices, data showed on Tuesday.
The report is the most crucial piece of data to be released before the Bank of Canada meets for its next monetary policy decision later this month, when analysts and investors expect the bank to cut rates for a second time in a row.
Analysts polled by Reuters had forecast annual inflation would rise to 2.3% in September from 1.9% in August.
The CPI rose 0.1% on a month-over-month basis in September, after a 0.1% decline in August, StatsCan said.
Gasoline prices have been on a declining trend on an annual basis after the Canadian government scrapped a carbon levy on the fuel that had kept prices up all of last year.
However, the decline in September was less than in August mainly due to a big fall in gasoline prices in September 2024, when the price of the fuel dropped 7.1% on a dour global economic outlook.
Excluding gasoline, the CPI rose 2.6% in September following a 2.4% acceleration in August.
Economists have focused on the BoC's preferred core measures of inflation, which exclude the impact of tax measures, to gauge price trends.
One of the core measures of inflation, the CPI-median, or the centermost component of the CPI basket, was at 3.2% in September, unchanged from the upwardly revised number last month on an annual basis.
The other core measure, CPI-trim, which excludes the most extreme price changes, edged up to 3.1% in September from 3.0% in August, StatsCan said.
The share of the CPI basket that was above a 3% price rise was 37.9% in last month and the share of the CPI basket that was below a 1% rise was 38.5%.
"While there might be scope for debate about inflation, there should be no disagreement that the economy is weak and in need of support," said Royce Mendes, managing director and head of macro strategy at Desjardins.
Money markets put a more than 86% probability on a 25-basis-point rate cut on October 29, which would bring the benchmark policy rate down to 2.25%.
The Canadian dollar was trading up 0.12% to 1.4018 against the U.S. dollar, or 71.34 U.S. cents.
Food prices increased 3.8% annually last month, after a 3.4% increase in August. This rise was mainly due to a 4% increase in food purchased from stores, against a 3.5% increase seen in the previous month.
The increase in grocery prices last month marks the largest year-over-year rise since the most recent low in April 2024, the statistics agency said.
Rents also contributed to a year-over-year increase in CPI, with a 4.8% jump in September. That move took shelter inflation, the biggest component of the CPI basket, to 2.6%.
(Reporting by Promit Mukherjee; Editing by Dale Smith, Paul Simao and Andrea Ricci)