Canada’s inflation rate fell to 6.8% in November as lower gas prices offset higher food, rent costs

Canada’s inflation rate fell to 6.8% in November as lower gas prices offset higher food, rent costs

Canada’s inflation rate eased in November, as an acceleration in grocery and rent prices was offset by a decline at the gas pump.

The Consumer Price Index rose 6.8 per cent compared to the previous year, Statistics Canada reported Wednesday. That’s down from 6.9 per cent in October, although slightly ahead of economist expectations of 6.7 per cent.

On a monthly basis, CPI rose 0.1 per cent compared to a 0.7-per-cent gain in October.

While overall CPI inflation continued trending down from a peak of 8.1 per cent reached in June, core inflation measures that strip out volatile food and gasoline prices ticked up in November. That could increase the odds that the Bank of Canada raises interest rates again in January.

The central bank has signalled that it’s approaching the end of its aggressive rate-hike cycle, and officials have said they may consider pausing rate hikes in January. Markets are pricing in a roughly 50 per cent chance that the bank halts at its next meeting on Jan. 25.

“Turning the temperature down on inflation is proving to be an achingly slow process, and we suspect this may be a theme for 2023,” Bank of Montreal chief economist Doug Porter wrote in a note to clients following the CPI data publication.

“While lower pump prices will help chop next month’s rate, the fact that many measures of core inflation are still nudging higher is a clear warning sign of persistent underlying pressures. We are leaning to the view that the Bank of Canada hikes rates one more time in January to 4.5 per cent, and this firm report does nothing to doubt that call.”

Canadians got a break at the gas pump, where prices fell 3.6 per cent compared to October. The price of gasoline was still 13.7 per cent higher than last November.

There was little relief at the grocery store, where prices were up 11.4 per cent compared to the previous year – a bigger annual jump than in October. The price of chicken was up 9.3 per cent, partly because of reduced global supply following an outbreak of avian influenza, Statscan noted. Coffee and tea prices were up 16.8 per cent, while cereal prices rose 15.7 per cent.

Canadians also paid more for shelter in November. Rent was up by 5.9 per cent year-over-year, compared to a 4.7 per cent increase in October. Meanwhile, mortgage interest costs rose 14.5 per over the previous year, the largest increase since 1983.

“The rise in rental inflation will concern the Bank [of Canada] because, unlike in the U.S., there is little sign in the private sector measures that rental growth will soon slow sharply,” Stephen Brown, senior Canada economist with Capital Economics wrote in a note to clients.

Of the central bank’s two preferred core inflation measures, CPI-trim remained steady at 5.3 per cent, while CPI-median ticked up 0.1 percentage point to 5 per cent.


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