Canada: Inflation increases in December
Inflation came in at 3.4% in December, up from November’s 3.1% and moving further above the Central Bank’s 1.0%–3.0% target range. The reading was in line with market expectations. Looking at the details of the release, the change in prices for housing and transport rose at a faster rate in December.
Annual average inflation edged down to 3.9% in December (November: 4.1%). Meanwhile, core inflation edged down to 2.6% in December, from the previous month’s 2.8%.
Finally, consumer prices fell 0.31% in December over the previous month, contrasting the 0.13% rise logged in November. December’s result marked the sharpest fall in prices since December 2022.
On the monetary policy implications, TD Economics’ Leslie Preston said:
“If you are looking for data to signal a rate cut is imminent, this isn’t it. December’s inflation report underscores that the last mile of getting inflation all the way back to 2% is the hardest. It took about a year for inflation to drop from its peak of 8% to around 3%, but over the past six months further headway has been halting. This leaves the Bank of Canada cautious as it considers when it will be appropriate to cut interest rates. Despite December’s report, we expect inflation, and the economy, will have cooled sufficiently by the spring for the Bank of Canada (BoC) to make its first interest rate cut in April.”