Canada: Inflation eases in November
December 21, 2010
In November, consumer prices rose 0.1% over the previous month, following on the 0.4% price increase in October. The reading came in below market expectations, which had seen consumer prices adding 0.3% in November. As a result of the subdued price increase, annual headline inflation dropped to 2.0% in November from a two-year high of 2.4% in October. The main drivers behind the moderation in annual inflation were lower prices for clothing and footwear (-3.2% year-on-year), offset by higher energy prices (+6.7% yoy) and transport prices (+4.6% yoy). Annual core inflation, which excludes oil and fresh food prices, declined to 1.4% in November (October: 1.8%), falling further below the 2.0% target set by the Bank of Canada (BoC). Thus, the Central Bank remains unlikely to raise interest rates at its next monetary policy meeting scheduled for 18 January 2011. The Bank of Canada forecasts inflation to average 2.1% in the fourth quarter of 2010 and to moderate to 1.9% in the fourth quarter of 2011.