Canada: Inflation falls to lowest level since September in December
Latest reading: Inflation came in at 1.8% in December, which was down from November’s 1.9% and below market expectations. December’s figure represented the lowest inflation rate since September, and was weighed on by a tax exemption for some items in the consumer price basket. Looking at sectors, the downturn was broad-based, with reduced price pressures recorded for housing, transportation, and food.
In addition, the trend pointed down mildly, with annual average inflation coming in at 2.4% in December (November: 2.5%). Meanwhile, core inflation ticked up to 1.8% in December from the previous month’s 1.6%.
Finally, consumer prices dropped 0.37% from the previous month in December, coming in below the flat result seen in November. December’s result marked the weakest reading since September.
Panelist insight: On the monetary policy implications, TD Economics’ Leslie Preston said:
“Despite the tax cut driven dip in headline inflation, core inflation pressures have picked up over the past three months, suggesting that inflation readings are likely to move up a bit in the months ahead. This will give the Bank of Canada reason to adopt a more gradual pace of interest rate cuts this year. We expect a quarter point cut at every other decision in 2025.”