MNI: Canada's 6.8% Nov Inflation Is Faster Than Expected

Canada's inflation rate was a faster-than-expected 6.8% in November and core prices remained near record highs, keeping pressure on the central bank to raise borrowing costs for an eighth straight meeting next month.

The November pace barely slowed from October's 6.9% and exceeded forecasts for 6.6%. Consumer prices rose 0.1% on a monthly basis, Statistics Canada said Wednesday, also faster than predictions they would be unchanged. Yearly price gains were led by a 14% increase in gasoline, a 7.8% increase in automobiles and a 15% rise in mortgage interest costs that was the biggest since 1983. 

Two core measures watched by the Bank of Canada were also sticky at a time when policy makers are worried about price expectations becoming entrenched. The "median" core index climbed a notch to 5% to match a record high and the "trim" measure held steady at 5.3%, close to a record 5.5% set in June. Another measure of trend inflation, CPI excluding food and energy, rose a notch to 5.4%.

Bank Governor Tiff Macklem earlier this month hiked the key lending rate a half point to 4.25% and said whether to go further is a more data dependent decision. The market is split on whether he will hike again or not to start 2023, following a year where the Bank’s rate decisions didn’t align with market expectations at four of its eight meetings. One official has also said the Bank can make another forceful move if the data turns out badly.

There will be another CPI report before the Bank’s Jan. 25 rate decision, along with readings on jobs and GDP. Still, the Bank has said upside inflation risks are more compelling after CPI reached a four-decade high of 8.1% earlier this year to quadruple its 2% target. Officials say that goal won't be reached until the end of 2024, even as the overheated economy may fall into recession next year.

The November report is the second month of disappointing data after inflation held at 6.9% in October. Other data show a tight economy, including third quarter GDP growth at about a 3% annualized pace and the unemployment rate near a record low around 5%. Several provincial governments are mailing out new relief checks that make the inflation fight even harder.

Households and firms in the Bank's October outlook surveys held some near record price expectations and this report also showed some eye-popping gains on high profile items, including a 17% jump in eggs and a 16% rise in bakery products.