Canada's inflation rate down a tick to 1.9% in November

Canada's inflation rate eased slightly to 1.9 per cent in November, slightly below the Bank of Canada's two per cent target, but economists expect some volatility in the coming months. The consumer price index report from Statistics Canada showed inflation fell to 1.9 percent in November from 2 percent in October.

“Generally speaking, anything between one and three percent is perfectly fine for the Bank of Canada's mission,” Rhys Mendes, managing director and head of macro strategy at Desjardins Capital Markets, said in an interview. He added that considering that overall inflation is slightly less than two percent and core inflation is slightly higher than two percent, there is not much concern about this report.

The report showed that the two main inflation indicators that the Bank of Canada pays attention to remained constant and were 2.6 and 2.7 percent, respectively. The overall slowdown in inflation is because goods inflation has stalled, while wage growth and high housing costs continue to drive up the price of services.

Inflation in Canada has remained around the Bank of Canada's two percent target for the past few months, which has provided the conditions for the bank to cut interest rates. After cutting interest rates by half a percentage point last week, central bank governor Tiff McClam said the central bank would consider a more gradual approach to monetary policy if the economy performed as expected.

However, economists said it would be difficult to predict underlying inflation trends in the coming months as the December figures were affected by the GST holiday on some goods and services. The federal government has announced that it will waive the 5 percent tax on certain products between December 14 and February 15.

Longer-term factors, such as Trump's threat to impose 25 percent tariffs on Canadian goods, could also weigh on inflation in the coming months.

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