Canada Inflation Holds at 2.2% as Core Pressures Ease

Shoppers on Sainte-Catherine Street in Montreal. (Andrej Ivanov/Bloomberg)

Inflation in Canada held steady last month while core measures broadly cooled, as accelerating price increases for food and some other goods were offset by slowing services price growth.

Headline inflation rose at a 2.2% yearly pace in November, matching the pace in October, Statistics Canada data showed Dec. 15. That was slower than the median expectation of 2.3% in a Bloomberg survey of economists.

On a monthly basis, the consumer price index rose by 0.1%, matching expectations.

Bonds rallied on the data, pushing down the yield on two-year government benchmark debt to 2.58% as of 8:58 a.m. Ottawa time. The loonie trimmed gains against the U.S. dollar.

The Bank of Canada’s two so-called preferred core measures, the median and trim gauges, decelerated to a 2.8% annual pace, from 3% previously. On a three-month moving annualized basis, they slowed to 2.3%, from 2.6% in October.

The central bank has, in recent months, placed less emphasis on these two metrics and instead said a broad range of measures points to underlying inflation of about 2.5%.

“It does look like some more positive signs of underlying inflation slowing,” Citigroup economist Veronica Clark said on BNN Bloomberg Television, while adding that rent costs are showing “some stickiness.” 

Core price pressures generally cooled or held steady in November. Excluding food and energy, prices rose 2.4% from a year earlier, down from 2.7% in October. Inflation excluding gasoline prices rose at a 2.6% pace for the third straight month. And the bank’s previous measure of core inflation — CPI excluding eight volatile components and indirect taxes — held at 2.9%.

Still, the breadth of inflationary pressures widened, with about 42% of items in the consumer price index rising above a 3% yearly pace, from 34% previously.

Altogether, the report shows headline inflation trending down toward the central bank’s 2% target, even as some measures of underlying inflation remain closer to 3%. The Bank of Canada is likely to be unfazed by ongoing core pressures, as it sees continued slack in the Canadian economy as U.S. tariffs batter key sectors and weigh on business investment and consumer spending.

The central bank held its policy rate steady at 2.25% last week and reiterated it sees borrowing costs at “about the right level” to support growth while keeping inflation contained. Governor Tiff Macklem set the bar relatively high for a move off the sidelines, saying the bank will respond if there is “a new shock or an accumulation of evidence” that “materially changes the outlook.”

Policymakers expect inflation to remain close to the 2% target, around where it’s been for more than a year.

In November, lower prices for travel tours and accommodation, as well as slower growth in rent prices, put downward pressure on headline inflation. Higher costs of groceries, as well as a smaller decline in gasoline prices, were the main upside contributors.

Lower travel prices were driven partly by a base-year effect, as Taylor Swift performed in Toronto in November 2024.

Grocery prices rose 4.7% in November, the largest increase since December 2023, as the cost of fresh fruit jumped and prices for beef and coffee continued to be significant contributors.

Prices rose at a faster pace in five provinces, led by New Brunswick.

The report is the first of two inflation releases before the central bank’s next rate decision on Jan. 28. Traders expect the bank to hold rates steady until at least October 2026, when they see a possible hike.