• Consumer price inflation was unchanged in December, remaining at a 2.2% year-on-year pace. This was roughly in line with market expectations for 2.3% rise in prices.
  • On a seasonally adjusted basis, inflation was 0.4% month-on month, picking up a somewhat from November’s 0.1% pace.
  • Energy prices were again the main driver of price growth, with last month’s year-on-year gain flattered by a weak 2018 comparator. Excluding gasoline, inflation was 2.0% – the slowest pace since November 2018.
  • The Bank of Canada’s core inflation measures were down slightly as a group. While CPI-common ticked up to 2.0% year-on-year (from 1.9%), CPI-median and CPI-trim both decelerated slightly, to 2.2% and 2.1% respectively.

Key Implications

  • It was steady as she goes for consumer price growth in December as energy prices masked a more modest month of yearly price gains. As has been the case for the latter half of last year, the fairly staid performance of the Bank of Canada’s measures, together with headline prints suggest that the underlying pace of inflation remains pretty much on the Bank of Canada’s 2% target.
  • We continue to look for a slight moderation in the pace of headline inflation as year-ago energy price comparisons normalize, but expect price gains to remain around the 2% mark.
  • When it comes to the Bank of Canada’s decision later this morning, the outlook for growth will be more important than the current inflation story. The wholesale trade report also released this morning showed a broad-based contraction – the third in five months, adding more evidence that Canada likely recorded a very weak economic performance to close out 2019. How much of this the Bank views at temporary (strike and other disruption related) versus a more fundamental slowing will likely have been key in their deliberations on the path forward for monetary policy.


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