Canada’s inflation rate decelerated in November but key gauges of underlying price pressures trended higher, potentially dashing hopes for a pause in interest-rate increases.
The consumer price index rose 6.8 per cent from a year ago, higher than economist expectations of 6.7 per cent and down from 6.9 per cent in October, Statistics Canada reported Wednesday in Ottawa. On a monthly basis, the index gained 0.1 per cent in November, exceeding forecasts for no change.
The report shows price pressures remain stubbornly high, even as the economy gears down and higher borrowing costs curb domestic demand. The persistence of inflation may prompt Bank of Canada Governor Tiff Macklem to deliver another rate hike in a bid to restore price stability.
Citigroup Inc. economist Veronica Clark said the numbers support a 25-basis-point rate increase in January. “I’m also still penciling in another 25 at the March meeting. I think this is still a BOC that’s first and foremost focused on inflation and clearly we’re not moving quite in the direction that they want yet,” she said on BNN Bloomberg Television.
Short-term bonds sagged, driving the benchmark two-year yield to 3.711 per cent at 10:04 a.m. Ottawa time, up nearly 5 basis points from its pre-release level.
Two key yearly measures tracked closely by the central bank — the so-called trim and median core rates — inched higher, averaging 5.15 per cent in November from an upwardly revised 5.1 per cent a month earlier.
“The stickiness in core trends around 5 per cent or higher hints at the possibility of even further rate hikes later on — and that’s something nobody is talking about,” Douglas Porter, chief economist at Bank of Montreal, said in a report to investors. “The fact that many measures of core inflation are still nudging higher is a clear warning sign of persistent underlying pressures.”
On a seasonally adjusted monthly basis, CPI rose 0.4 per cent, down from 0.6 per cent in October.
Shelter and groceries pushed inflation higher in November. Mortgage interest costs jumped 14.5 per cent, the largest increase since February 1983, while the rent index rose 5.9 per cent as higher interest rates added more barriers to homeownership. Prices for food purchased from stores rose 11.4 per cent over the prior year, following an 11 per cent gain in October.
The inflation numbers — the first of two prints before the Bank of Canada’s next rate decision on Jan. 25 — reflect how rising interest rates meant to slow the economy are also adding to consumer costs.
Earlier this month, the central bank said future hikes would be guided by economic data, and underlying pressures will play a key role in determining when interest rates will stop rising. Most economists expect Canada will enter a technical recession at the beginning of next year.
After Wednesday’s report, overnight swap traders put the odds of another 25 basis-point hike near two-thirds, from about half before the release.
Macklem and his officials have already raised borrowing costs by 4 percentage points since March, bringing the benchmark overnight rate to 4.25 per cent.
https://news.google.com/__i/rss/rd/articles/CBMiZmh0dHBzOi8vd3d3LmJubmJsb29tYmVyZy5jYS9zdGlja3ktY29yZS1pbmZsYXRpb24ta2VlcHMtdXAtcHJlc3N1cmUtZm9yLXJhdGUtaGlrZXMtaW4tY2FuYWRhLTEuMTg2MjEzMNIBAA?oc=5
2022-12-21 15:17:15Z
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