Canada’s inflation slows in November, BoC to remain biased towards easing if economic growth fails to improve

Canada’s consumer price inflation decelerated in November from October. Consumer price index came in at 1.2 percent year-on-year, as compared with October’s 1.5 percent year-on-year. Bank of Canada’s all the three new preferred measures for core inflation – CPI-trim, CPI-median, and CPI-common – slowed in November. CPI-common decelerated to 1.3 percent in November, CPI-median decelerated to 1.9 percent, while CPI-trim slowed to 1.6 percent.

The main source of slower price growth was the transportation index that decelerated to 1.4 percent, mainly because of gasoline prices, which dropped 1.7 percent year-on-year. Furthermore, clothing and footwear also weighed on inflation, noted TD Economics in a research report. On the other hand, recreation, reading and education exerted upward pressure on inflation, rising 2.1 percent in the month.

Inflation in Canada seems to be easing. The Bank of Canada’s three core inflation measures are all giving the same message that inflation is under the central bank’s target, in line with an economy operating with a modicum of excess supply, stated TD Economics.

Lower gasoline prices are a nice development; however, it would not last given that the general march upward in energy prices in the past year. Still, while the consumer price inflation will continue to accelerate on higher energy prices, it is unlikely to get much above the 2 percent.

“There is no urgency on the inflation front for the Bank of Canada. Given the tightening in financial conditions imported from abroad the bias at the Bank will remain toward further easing should economic growth fail to improve”, added TD Economics.