Canada’s inflation rate edges down to 1.9%

Canada’s annual inflation rate ticked down to 1.9 per cent in November, with the slowdown in price growth mostly driven by lower mortgage interest costs and cheaper travel tours, Statistics Canada said on Tuesday.

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Inflation largely came down across the board. The price of groceries slowed 2.6 per cent compared to the same time a year ago. But those costs are still high, having risen 19.6 per cent since November 2021, the agency said.

While the headline inflation rate hit the Bank of Canada’s two per cent target in September, its preferred core measures of inflation are still trending well above that magic number, with CPI-median at 2.6 per cent and CPI-trim at 2.7 per cent in November.

“This report reinforces the point that the Bank will now turn to a more gradual path for rate cuts as we head into 2025,” wrote BMO chief economist Douglas Porter in a note to clients.

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While BMO expects another cut at the central bank’s Jan. 29 meeting, “another meaty set of core readings next month will prompt some chattering about a pause, especially with the [U.S. Federal Reserve] seemingly headed that way in January and the loonie on the ropes,” Porter wrote.

Mortgage interest costs slow, but rent prices still growing

On the housing front, shelter prices grew at a slower pace of 4.6 per cent year-over-year in November.

Mortgage interest costs slowed for the 15th consecutive month. But rental prices grew at a faster yearly rate in November (7.7 per cent) compared with October (7.3 per cent), with Ontario, Manitoba and Nova Scotia hit hardest.

Gas prices also fell in November to –0.5 per cent, but had a smaller year-over-year decline due to a base-year effect — the impact of comparing prices in a given month to the same month a year earlier. With gasoline excluded, overall inflation rose two per cent last month.

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Black Friday deals contributed to lower prices last month, especially in household operations, furnishing and equipment (lower prices for cell services came in at –6.1 per cent), and in clothing and footwear, according to StatsCan.

The monthly decline for children’s clothing is the largest one ever recorded in November, the agency said.

“It will remain difficult for policymakers to determine the underlying trend in inflation over the next few months, with December figures weakened by the mid-month start of a GST holiday on certain goods/services,” wrote CIBC senior economist Andrew Grantham.

When the tax is reinstated in mid-February, inflation figures will see a temporary boost, he added. The Bank of Canada’s preferred core measures of inflation likely won’t feel as much of the impact.

Still, “throughout this period the Bank’s assessment of slack in the economy, including how it views upcoming employment data, should become even more important in determining policy decisions,” Grantham wrote.