(Ottawa) Economists expect the inflation rate to have increased last month. However, they do not believe the situation is alarming, as the pressure should ease.
Statistics Canada is due to present the Consumer Price Index for the month of December on Tuesday. We could then have a better idea of the inflation rate for the whole of 2023.
Experts expect December inflation to be higher than the 3.1 rate seen in November, as the decline in gasoline prices had been greater in December 2022 than last month. The impact of price fluctuations recorded 12 months earlier on overall inflation is called the year-on-year effect.
CIBC forecasts that the inflation rate will have reached 3.4% in December.
It’s really because of the impact of gas prices. We hope to see some improvement in some of the indices that the Bank of Canada monitors closely.
Andrew Grantham, Managing Director and Senior Economist at CIBC
According to the United States Department of Labor, the inflation rate reached 3.4% among our neighbors, an increase of 0.3 points compared to November. This increase is attributable to rising energy, food and real estate prices.
Economists warn that even though the inflation rate rose in December, that does not mean the future will be gloomy on this front.
The Bank of Canada is more closely monitoring indexes that ignore price volatility. If these indices fall, it means that price pressure continues to ease. If so, the central bank will breathe a sigh of relief.
In the United States, so-called basic prices increased by 3.9% in December, the smallest increase since May 2021.
The central bank is also observing how inflation has evolved in recent months.
James Orlando, economic director of TD Bank Group, predicts a rate of 3.3% for December. He believes inflation has eased in recent months as some indexes fluctuate between 2% and 3%.
This is what people need to remember, because this is what will guide the data over the coming months,” he emphasizes.
Food prices rose 4.7% in November from a year earlier, marking a slowdown from October’s 5.4%. The slowdown is expected to have continued into December.
However, Grantham cautions, that doesn’t mean the grocery bill won’t go down for families, because inflation has continued to rise, albeit at a lower rate.
“Unfortunately for families, the bill will be even higher, especially if we compare to the price situation two or three years ago. »
Economists expect the Bank of Canada to begin lowering its key rate when it is confident enough to see inflation falling toward the 2% target.
The subject of the year will be to see if inflation is low enough for the Bank of Canada to feel confident enough to reduce its key rate, which is very high at the moment.
Andrew Grantham, Managing Director and Senior Economist at CIBC
The Canadian economy should have slowed enough to convince the Bank of Canada that it is no longer overheating. This slowdown should have a dampening effect on price pressure, allowing the central bank to change direction.
“When the board of directors is convinced that price stability is being reestablished, we will then consider lowering the key rate, and when to do so,” declared the Governor of the Bank of Canada, Tiff Macklem. I know it’s tempting to start discussing these declines, but it’s still too early to think about them. »