The Canadian inflation rate cooled to below 2% in November.
Statistics Canada’s consumer price index on Tuesday showed the national year-over-year inflation rate at 1.9% last month. That is down from a 2% increase in October and slightly below what most analysts and economists were expecting.
The national inflation rate has remained at or near the Bank of Canada’s preferred target of 2% since August and reinforces the notion that declining interest rates have largely accomplished the task of taming inflation that peaked at 8.1% in June 2022, the highest in four decades.
The Bank of Canada announced another ‘super-sized’ 50-basis point interest rate reduction last week to bring its key policy rate down to 3.25%. The reduction, which followed a 50-point cut in October, has helped lower the Bank rate by 1.75% since June. The rate is now at the top end of the bank’s so-called neutral range, the sweet spot where it neither stimulates nor dampens economic activity.
From here on out – and with inflation remaining under control – it now appears the Bank will take a more moderate approach to any potential further interest rate cuts.
According to StatsCan, slower price growth was broad-based in November, with prices for travel tours and the mortgage interest cost index contributing the most to the deceleration.
Notably, mortgage costs decelerated for the 15th consecutive month in November (+13.2% compared to +14.7% in October), helping to slow the growth in overall shelter costs to 4.6% versus the 4.8% gain seen in October.
Grocery store food prices rose 2.6% year-over-year in November, down slightly from a 2.7% advance the previous month. However, despite the slowdown, grocery prices remained elevated, up almost 20% compared to November 2021.
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