Canada annual inflation cools in November, keeping rate cut odds alive

Thu Dec 22, 2016 9:26am EST
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By Leah Schnurr

OTTAWA (Reuters) - Canada's annual inflation rate cooled in November, suggesting the Bank of Canada will maintain its cautious stance and keeping alive the possibility of another rate cut as new measures of underlying inflation also fell short of the central bank's target.

Separate data from Statistics Canada on Thursday showed October retail sales rose more than expected, boding well for economic growth at the start of the fourth quarter.

But economists were focused on the inflation figures that showed the annual rate decreased to 1.2 percent from October's 1.5 percent, short of forecasts for 1.4 percent.

Three new measures of core inflation were slightly more robust but still below the bank's 2 percent target. Economists said the possibility of another rate cut could not be ruled out, although most expect the bank to stay on the sidelines until 2018.

That is in contrast to the U.S. Federal Reserve, which raised rates earlier this month. [CA/POLL]

"It will just reinforce the Bank (of Canada's) message that they have zero interest in following the Fed higher," said Doug Porter, chief economist at BMO Capital Markets.

"In fact, I think it will keep a flicker of doubt out there that the bank could even consider cutting rates, in an extreme situation."

The Canadian dollar weakened against the greenback following the data. [CAD/]   Continued...

Shoppers stroll through the 5.3 million square foot (492,000 square metre) West Edmonton Mall in Edmonton, Alberta February 26, 2015.  REUTERS/Dan Riedlhuber