Canadian CPI will fall below 3%, RBC says

What did November bring for Canadian inflation pressures? RBC says we should expect some moderately good news.

On December 19, Statistics Canada will release the November Consumer Price Index. In a research report released December 15, RBC economists Nathan Janzen and Claire Fan summarized what they expect to see.

“We expect Canadian inflation pressures to have moderated more in November,” the pair said. “Headline inflation is expected to have dropped to 2.9% from 3.1% in October reflecting a pullback in retail gasoline prices and further easing in food price growth. That would mark the second time since March 2021 that the reading dips back within Bank of Canada’s 1%-3% target range for inflation after what has been a drawn-out fight between the central bank and very sticky domestic price pressures. We expect price growth excluding food and energy products stayed at 3.4% year-over-year in November, driven by higher shelter costs – more than a third of the rise in ex-food & energy prices in Canada as of October came from mortgage interest costs as higher interest rates continue to flow through to household debt payments with a lag. Both BoC’s preferred core measures – CPI trim and CPI median are also expected to have eased again in November, extending improvements seen in the prior month.”

Noting that Canadian GDP has declined for five consecutive quarters, the economists say a weaker economic backdrop in all likelihood means that the Bank of Canada is done raising rates. But don’t expect rates cuts right away, they warn, because the BoC will be cautious about declaring victory over inflation, which will delay the beginning of the cut cycle.