Canada’s inflation rate declined to an annualized 6.3% in December, driven lower by a reduction in energy prices.
The Consumer Price Index rose 6.3% in December from a year ago, according to Statistics Canada. That was slower than the 6.4% gain forecast by economists and lower than the 6.8% annualized increase seen in November of last year.
On a monthly basis, the CPI dropped 0.6% in December, the biggest monthly decline since April 2020.
Despite a continued deceleration, inflation remains well above the Bank of Canada’s 2% target.
The consensus view among economists is that the central bank will raise interest rates a further 25-basis-points at its next policy meeting on January 25.
Lower gasoline prices led to the December decline in inflation across Canada. Consumers paid 13% less at gasoline pumps in December compared to November, also the largest monthly decline since April 2020.
However, lower energy prices were partially offset by increases in mortgage interest costs, as well as clothing and personal care supplies.
Mortgage interest and rent prices in Canada were up 18% and 5.8% respectively in December from a year ago.
Grocery prices also remain elevated and slowed only slightly in December. The cost of food purchased from stores rose 11% in December from a year earlier.
All provinces across Canada reported slower year-over-year inflation in December, indicating that consumer price moderation is widespread across the country.
The Canadian dollar strengthened about a fifth of a cent on news of the latest inflation data, trading at $1.34 per U.S. dollar.
