MNI: Canada CPI Quickens, Core Rates Slow For A Third Month

Canadian inflation quickened in December reflecting the end of a temporary sales tax reduction while core price indexes moderated for a third consecutive month, the federal statistics office reported Monday, giving little reason for central bankers to alter their view they can hold interest rates.

Statistics Canada's consumer price index gained 2.4% in December from a year earlier compared with the prior 2.2% pace. That was a mostly technical rise with restaurant meals climbing 8.5% after the end of a federal sales tax break, an effect that will eventually fall out of the index. The increase was moderated by a 14% fall in gasoline prices reflecting another tax change with the removal of the federal carbon levy, as well as lower global crude costs. 

The Bank of Canada's core index gains were both the slowest since December 2024. The "trim" index moderated to 2.7% from 2.9% and the "median" to 2.5% from 2.8%. An MNI economist survey expected core rates of 2.7%, and 2.2% headline inflation.

Governor Tiff Macklem last month said he intends to keep the policy interest rate at 2.25% or the lower end of his neutral range unless there is a major economic shock. Some economists see the rate staying on hold all year in a sluggish economic rebuild from U.S. tariffs that hit exports and investment. The next rate announcement is Jan. 28.

Slowing core inflation is welcome news to officials who expanded their tracking of trend CPI after a period of elevated readings in their preferred measures. Officials have said the real trend appears to be more around 2.5%.

Another measure of inflation momentum quickened however: excluding gasoline consumer price gains climbed to 3% from 2.6%. A few high profile items posted big gains. Grocery costs advanced 5% led by coffee up 31% and beef 17%.