Canada: Inflation dips in January, unlikely to shake Bank of Canada's plans
February 23, 2018
Seasonally-adjusted consumer prices rose 0.5% from a month earlier in January, jumping from December’s downwardly revised 0.1% increase (previously reported: +0.2% month-on-month). According to Statistics Canada, January’s acceleration was primarily due to higher shelter prices and a significant jump in household-related charges. Meanwhile, the rise in food prices eased marginally from December.
Inflation eased in January on a slower rise in fuel and vehicle prices, falling to 1.7% from 1.9% in December but still landing comfortably within the Bank of Canada’s target range of 2.0% plus/minus 1.0 percentage point. Market analysts had expected a weaker reading of 1.4%. Meanwhile, annual average inflation was stable from a month earlier at 1.6%. Core inflation, which excludes volatile items including fuels and fresh produce, was stable from December at 1.2%.
Commenting on January’s reading and its implications for the Bank of Canada’s ongoing tightening cycle, Nathan Janzen, Senior Economist at Royal Bank of Canada, noted:
“There’s still not a lot of evidence that inflation pressures are really getting out of hand in a way that would force the Bank to hike more quickly than they’ve been planning to. At the same time, you are seeing the firming that’s been expected, so that means the economy is probably still strong enough, in their view, to withstand further gradual rate hikes.”