Canada’s October Inflation Expected to Ease, but Core Prices Still Sticky

Ottawa | 17-Nov-2025, 11:10 AM EST —

Canada’s October inflation report, due later today, is shaping up to be one of the most closely watched data releases of the fall. Early estimates from RBC Economics suggest that headline CPI may cool to around 2.1% year-over-year, bringing inflation within sight of the Bank of Canada’s comfort zone. But for the mortgage market, the more important story sits beneath the surface: core inflation remains stubborn, with forecasts placing it between 2.4% and 3.0%, depending on the measure used.

This mix of positive headline movement and persistent underlying pressure creates a complicated environment for both borrowers and lenders. On the surface, a CPI number closer to 2% looks like welcome progress. But the stickiness in core inflation — particularly in areas tied to shelter and household services — means mortgage markets cannot assume rate stability forever.

Economists point out that the overall moderation comes largely from softer gasoline prices, a pullback in grocery inflation, and stabilizing energy components across several provinces. British Columbia and Alberta, for instance, saw year-over-year energy inflation drop more sharply than expected after provincial adjustments to carbon fees earlier in the year. These drops helped pull down the national headline number, giving the appearance of broader relief.

But the picture changes when looking at core measures such as CPI-median and CPI-trim, which are designed to strip out the most volatile components of the index. RBC’s preview suggests CPI-median may sit near 3.0%, while CPI-trim may land in the 2.7% range. These levels remain well above the Bank of Canada’s target and highlight that deeper inflation forces — wage growth, shelter prices, service-sector inflation — are not easing as quickly as headline figures imply.

Shelter inflation, in particular, remains a flashpoint. Mortgage interest costs are still high compared with pre-2022 levels, and rising rent prices continue to shape the overall CPI basket. Even though the Bank of Canada cut its policy rate earlier this year, mortgage-cost inflation remains elevated simply because many borrowers are renewing into higher rates. This dynamic is likely to persist well into 2026, adding friction to both the mortgage and housing markets.

For variable-rate borrowers, this mixed inflation outlook is frustrating but still somewhat manageable. The Bank of Canada has kept its overnight rate at 2.25%, signalling that further cuts would depend on both economic conditions and core inflation improvement. Most major banks have maintained their prime rates, which means variable borrowers are still experiencing more favourable short-term costs than during the peak of 2023. However, if core inflation proves “sticky” rather than “stable,” the Bank may keep rates on hold longer than borrowers hoped.

For fixed-rate borrowers, the situation is more nuanced. While headline inflation cooling normally helps soften bond yields, the persistence of high core inflation adds uncertainty to bond markets. Traders may become cautious, pushing yields up or preventing them from falling. As a result, the path to lower fixed mortgage rates may not be as smooth as headline CPI alone suggests.

Lenders, meanwhile, are preparing for a busy cycle of renewals in 2025 and early 2026. Many households will be transitioning from ultra-low pandemic-era fixed rates into today’s higher environment. Even a stable or slightly falling inflation landscape does not eliminate payment shock — it only determines the degree. If inflation remains firm, lenders may also have to factor in additional risk assessments around debt-service ratios and household vulnerability.

Economists also note that consumer spending data in the coming weeks will play a major role in shaping future inflation trends. If households pull back sharply in response to higher borrowing costs, it may accelerate disinflation. But if spending remains resilient, especially in services and housing, core inflation could hold firm.

As the Bank of Canada reviews the October inflation print, its tone will likely remain cautious. The central bank has been clear that while progress is visible, inflation is not yet sustainably at the target. Mortgage markets will be parsing every word for clues about future policy direction.

Bottom Line

Canada’s October CPI is expected to fall to around 2.1%, but core inflation between 2.4% and 3.0% suggests the inflation fight is not finished. For the mortgage market, this means mixed conditions: welcome progress on the headline, but no guarantee of quick relief for fixed or variable borrowing costs.