Canada: Core inflation running at its fastest pace in a decade in Q4 – NFB

Data released today showed that Canada’s consumer price index was flat in December and the annual rate remained at 2.2%. According to National Bank of Canada analyst, Matthieu Arseneau points out that the core inflation reached a cyclical high during the fourth quarter. 

Key Quotes:

“The Canadian headline inflation numbers were essentially in line with expectations in December. A strong month-to-month print was expected as gasoline prices were above seasonal norms and a strong rebound was expected in the air transportation category (+23.3%) as new sources of data have changed the seasonal pattern. However, the average of the three core measures preferred by the central bank remained unchanged in December at 2.1% (November print came out initially at 2.2% but was revised down one tick).”

“We caution against the temptation of making conclusions on a monthly print. The more reliable 3-month annualized change stands at 1.9% for both measures. Underlying inflation being essentially on the central bank’s target and the strength of the labour market should allow the Bank of Canada to stay on the sidelines in 2020. Of course, this assumes that the economic soft patch experienced by the Canadian economy in Q4 should prove temporary in a context of fading global uncertainties.”