TSX Falls After Canada’s Inflation Jumps to 4.0% In August

Canada’s inflation rate unexpectedly jumped in August for the second month in a row. This increases the odds that the Bank of Canada could increase interest rates at least once more this year. After pausing its overnight lending rate earlier in September, investors were optimistic that it would hold interest rates at 5%.

Will The Bank of Canada Raise Interest Rates Again?

Statistics Canada announced that the Consumer Price Index, which tracks inflation, grew to four percent in August, up from 3.3% in July and the highest annual inflation rate since April. Bay Street analysts’ were looking for August inflation to come in at 3.8%.

The big increase in inflation was juiced by high food and gasoline prices. On an annual basis the price of groceries at stores increased 6.9%. Gasoline prices inched up 0.8% on an annual basis, the first increase since the start of 2023. High inflation was also exacerbated by higher prices of rent and mortgage interest.

With inflation stubbornly high, the Bank of Canada may not have any option except to raise interest rates when it meets next on October 25. The next rate high could be the one that tips the Canadian economy into a recession. On the other hand, the bank of Canada could hold its interest rates at 5%. It can take over a year for the effects of interest rate hikes to make an impact on the economy.

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September continues to live up to its reputation as the worst month for investing with the TSX falling on an unexpected rise to Canada’s August inflation rate. The big question of course is whether the Bank of Canda will raise rates again when it meets in October and when it will actually start to cut interest rates. How could this impact stocks in the fourth quarter and in 2024? Ask the trading professionals at Learn-To-Trade.com.

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