Yesterday's Canadian inflation figures for September were slightly higher than expected, Commerzbank's FX analyst Michael Pfister notes.

Canada CPI surprise strengthens case for BoC delay

"Due to base effects, an increase in the headline rate of over 2% year-on-year was anticipated, but the actual increase was 2.4%, which is two-tenths of a percentage point higher than expected. Seasonally adjusted, this was the second-highest month-on-month increase since price rises began to level off. The trimmed mean, one of the core inflation measures, also rose slightly again."

"It should be noted that higher individual month-on-month inflation increases are not unusual. It would be more unusual for inflation to be exactly on target all the time. On average, even after the outlier, price increases over the last two years have remained consistent with the 2% target. Only if it becomes apparent in the coming months that yesterday's figures were not an exception are decision-makers at the Bank of Canada likely to become nervous."

"However, the figures do have one implication: they provide another argument against an interest rate cut next week. Most recently, labour market figures had already surprised positively and tended to favour a move in December. Although economists surveyed by Bloomberg still favour an interest rate cut in October, yesterday's figures have made us even more uncertain. We now think the December meeting is more likely. For the CAD, this is a good sign, at least in the short term."