By Ismail Shakil and Steve Scherer
OTTAWA (Reuters) – Canada’s annual inflation rate eased to 6.8% in November as gasoline price rose more slowly, data showed on Wednesday, leaving the door open for another interest rate increase in January.
Analysts had forecast inflation to decline to 6.7% from 6.9% in October. Consumer prices rose 0.1% from October, Statistics Canada said, above analysts’ expectations they would be flat. Excluding food and energy, prices rose 5.4% versus a 5.3% gain in October.
“The underlying core gauges still say that we are past the peak for very hot inflation numbers, but not exactly cool either, still tracking above the Bank of Canada’s target,” said Derek Holt, vice president of capital markets economics at Scotiabank.
“Today’s data will leave the door open to a 25 basis point rate hike in November,” said Royce Mendes, head of macro strategy at Desjardins Group.
However, Mendes still expects a pause after seven consecutive rate increases and notes that more key data will come out before the central bank’s next policy setting meeting on Jan. 25.
Going forward, the bank has said it will be more data-dependent in setting the policy rate. Money markets see a 45% chance of a 25 basis point rate increase in January, up from 42% before the data.
The Bank of Canada has hiked rates at a record pace of 400 basis points in nine months to 4.25% – a level last seen in January 2008 – to fight inflation that is far above its 2% target.
Gasoline prices rose 13.7% after gaining 17.8% in October, largely driven by price declines in Western Canada, Statscan said.
On the other hand, housing costs accelerated in November, mainly due to rising mortgage interest cost and rent. The annual surge of 14.5% in mortgage cost was the largest since February 1983.
Prices for food purchased from stores rose 11.4% from a year earlier versus an 11.0% gain in October.
“Turning the temperature down on inflation is proving to be an achingly slow process, and we suspect this may be a theme for 2023,” said Doug Porter, chief economist at BMO Capital Markets, in a note.
The average of two of the central bank’s core measures of inflation, CPI-median and CPI-trim, came in at 5.2% compared with 5.1% in October. CPI-common has become less reliable due to large revisions, the bank has said.
The Canadian dollar was trading at 1.3615 to the greenback, or 73.45 U.S. cents, little changed on the day.
(Reporting by Ismail Shakil and Steve Scherer in Ottawa; Additional reporting by Dale Smith and Fergal Smith; Editing by Lisa Shumaker)
