January 22, 2020 / 2:25 PM / 2 months ago

Instant View: Canada December annual inflation rate holds at 2.2%

TORONTO (Reuters) - Canada’s annual inflation rate in December held at 2.2%, as higher energy prices were balanced out by slower growth in fresh vegetables and passenger vehicles, Statistics Canada said on Wednesday.


Market reaction: CAD/

Link: here


“It came in a touch below consensus. The headline was unchanged at 2.2% year over year. We had declining gasoline prices this time a year ago, and with that not being repeated it put some upward pressure on the headline rate, which could continue through January but as we progress through 2020 that base effect will start to fade. The core measures held in just slightly above 2% on average. They’ve been pretty close to Bank of Canada’s 2% target for essentially two years now, maybe with the slightest upward trend from a bit below 2% to a bit above. But I don’t think the Bank of Canada’s going to be too worried.”

“We’ve seen over the second half of 2019 the economy gearing down somewhat, shifting towards slightly below potential growth. Some of that reflects transitory factors but it does appear that even outside of those factors, the underlying pace of growth did kick down somewhat. The fact that the Bank of Canada’s business outlook surveys are showing that the economy is operating pretty close to full capacity and inflation’s at 2% I think gives them some scope to tolerate slightly below trend growth if they expect that it’s going to ultimately prove transitory and that the economy is going to get back to growth closer to 1.8 or 2.0%. I think that’s really what’s going to determine any future action from the Bank of Canada.”


“I don’t think it affects anything for the Bank of Canada in the very near term.”

“The key is the (average of the) core inflation measures came back down to 2.1%, not only for the month of December but also for the prior month, with the revisions. For two months, we are getting less core inflation pressure than had been expected and I think we’ll see more of that as the rest of the year unfolds.”


“It was a bit of a mixed bag but generally speaking it looks like it basically landed right on the consensus we were looking at. I suppose the good news from the Bank of Canada’s perspective is that the core inflation rate didn’t move higher again. It looks as if you sort through it and look at averages of the three it appears to have moderated slightly. But I think the key point is both headline and core inflation are for all intents and purposes at the Bank of Canada’s target.”

“The bank’s take on inflation is that it’s essentially on target and I don’t think this changes anything.”

Reporting by Moira Warburton and Fergal Smith; Editing by Denny Thomas

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below