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MNI: Canada's Inflation Quickens For First Time in Four Months


Canada’s annual inflation rate quickened for the first time in four months in December led by housing, taking price gains further outside the central bank’s target band and affirming the official view it’s too early for actively debating lower interest rates.

Statistics Canada's Consumer Price Index advanced 3.4% from a year earlier compared with November's 3.1% pace and matching the economist consensus. Mortgage interest costs rose almost 30% in line with the record increases in recent months and rental costs climbed 7.7%. Core rates of inflation also remained elevated with the "median" index unchanged at 3.6% and the "trim" index quickening to 3.7% from 3.5%. 

The last major data before the Bank of Canada’s Jan. 24 interest-rate decision underlines that price gains have topped the official 1% to 3% target band for almost three years. So even though headline prices have slowed from a peak of 8% there is likely to be concern about persistent second-round effects as companies seek bigger markups and workers demand higher wages. The Bank's own survey published Monday showed a majority of firms see inflation remaining faster than 3% over the next two years. 

The Bank of Canada held its key rate at the highest since 2001 at 5% on Dec. 6 and Governor Tiff Macklem said that while there’s growing evidence that 10 hikes are re-balancing the economy he’s prepared to hike again if needed. Macklem also gave a speech saying officials will debate rate cuts when it’s clear that inflation is on a sustainable path back to 2%, while cautioning upside risks remain important. The Bank in October said it will take until 2025 for inflation to return to the 2% target.

Consumers continue to see headlines about elevated prices for high-profile items like groceries and gasoline. Prices for food purchased from stores rose 4.7% year over year in December, matching the increase in November. Gasoline cost 1.4% more than a year ago even as prices fell for a fourth straight month in December, though prices could jump if conflict in the Middle East worsens.

Canada’s inflation rate compares with 2.9% in the eurozone, 3.4% in the U.S. and 3.9% in the UK.

Statistics Canada said the annual average inflation rate across last year was 3.9%, down from 6.8% in 2022 and apart from that the fastest since 1991. 

MNI Ottawa Bureau | +1 613-314-9647 |
MNI Ottawa Bureau | +1 613-314-9647 |

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