Canada’s inflation rate rose 4.7% in October from the previous year, its highest level since February 2003 and well above the Bank of Canada’s 2% target.

October’s inflation rate, which comes after reading 4.4% in September, is at the highest level in three decades since the Bank of Canada began targeting inflation at 2% in 1991.

The 4.7% figure for October was in line with economists’ expectations. On a monthly basis, prices rose 0.7%, which was also in line with estimates. Last week, the United States announced inflation at 6.2% for October, which was higher than expected.

Higher prices for energy, shelter and food dominated October’s consumer price hikes across Canada. Gasoline prices were a big contributor, up 5% in October and up 42% from the previous year. The global chip shortage continued to affect auto production, as prices for motor vehicles rose 6.1% on the year.

October is the seventh month in a row with inflation above 3%, adding to growing fears that price pressures will prove to be more persistent than expected. Inflation fears prompted the Bank of Canada to signal last month that it may start raising interest rates sooner than expected.


But for the Bank of Canada and other central banks, the concern is that too aggressive monetary policy tightening could hurt the global economic recovery from the pandemic.

Markets expect the Bank of Canada to raise its overnight key rate to 1.5% over the next 12 months from the current 0.25%.

Canadian bonds rallied on the latest inflation data, reflecting relief that inflation has not beaten expectations, as it has in the United States and elsewhere.