Bank of Canada – Canada’s Inflation Edges Up, but Still Below Target
Canada’s consumer price index (CPI) edged up to 0.9% in November from 0.7% during the previous month, the latest inflation report from Statistics Canada shows. Despite the increase, the inflation gain was still below market projections for a 1.0% rise and below the central bank’s target band for a second consecutive month, suggesting that weak consumer demand will remain one of policy makers’ top concerns in the months to come.
November was the seventh month in the past 13 where the headline inflation witnessed growth of less than 1% in annual terms. It was also the 19th month to see inflation below the central bank’s 2% target. The rise was mainly driven by an increase in shelter and food costs, but this was offset by lower prices for health and personal care, as well as for clothing and footwear.
Headline inflation recorded no change month-on-month, while the core rate, which excludes volatile items such as gasoline and food, declined to 1.1% from 1.2% in October, thus failing to meet market expectations for a 1.3% gain.
The Bank of Canada published its quarterly guidance in October, predicting that inflation in the fourth quarter would be 1.3%, but now this scenario seems rather unlikely. The bank is due to revise its forecast on 22 January.
Statistics Canada’s inflation report, which was released on Friday, prompted a decline in the Canadian dollar to a low of C$1.0713 to the US dollar, or 93.34 US cents, against C$1.0666, or 93.76 US cents, the previous day. The weakening justified analysts’ fears that the heavy discounting around Black Friday would prevent inflation from picking up steam in the short term.