Inflation picks up speed ahead of Bank of Canada interest rate decision
Canada’s annualized rate of inflation jumped to 3.4 per cent in December, a reacceleration that was widely anticipated by economists but that will likely leave the Bank of Canada in no rush to cut interest rates.
The hike in the headline inflation figure, up from a 3.1 per cent increase recorded in November, was largely due to a year-over-year rise in gasoline prices, according to the latest consumer price index data released by Statistics Canada on Jan. 16.
Gasoline costs were 1.4 per cent higher than in December 2022, even though monthly prices fell for the fourth month in a row, the national statistics agency said. In November, by contrast, gas prices had declined by 7.7 per cent year over year.
The 4.4 per cent monthly decline in gas prices is affected by continued uncertainty about oil demand and high levels of supply, which is putting downward pressure on prices, the agency said.
Excluding gasoline, the rate of CPI growth slowed year over year to 3.5 per cent in December from 3.6 per cent in November, but remains above the Bank of Canada’s target. The data is the last reading before the central bank’s interest rate decision next week.
Other categories that contributed to overall price growth included airfares, fuel oil, passenger vehicles and rent.
Grocery prices were 4.7 per cent higher, year over year, matching the increase in the prior month.
Prices for travel tours were lower, moderating the acceleration in the all-items CPI.
“Energy component pushed headline inflation reading higher with food price growth holding steady after slowing for five straight months,” Royal Bank of Canada economists Claire Fan and Abbey Xu wrote in a report following the release of the data.
The RBC economists said the December CPI
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