07:01 AM EDT, 09/19/2024 (MT Newswires) -- Canadian underlying inflation rebounded in August, said David Doyle, head of economics at Macquarie.

The average of trim/median was 0.21% month over month, an acceleration from a subdued reading in July. The year-over-year moderated again to 2.35%, however, the six-month trend edged higher and stands at 2.5% annualized.

While this suggests some stalling in progress, there was encouraging news elsewhere, stated Doyle. Headline inflation reached 2.0% year over year -- the midpoint of the Bank of Canada's targeted range -- the lowest pace since March 2021.

Macquarie maintains its baseline call that the BoC will proceed with cuts of 25 bps per meeting with the overnight rate reaching 2.25% by Q3 2025.

Evidence of stalling progress in underlying inflation measures, together with sticky wage growth may make the BoC more reluctant than otherwise to increase the cutting pace to 50 bps at the October meeting, added Doyle. Nonetheless, a 50 bps cut remains possible.

The upcoming Labour Force Survey on Oct. 11 is also likely to be a key input, particularly given Governor Tiff Macklem's recent comments to the media on downside risks to growth, according to the economist.