TORONTO (Reuters) – Canada’s annual inflation rate dropped to 1.8% in December, Statistics Canada said on Tuesday, slightly lower than expected and a tick below the prior month’s 1.9%.
Market reaction: [CAD/]
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COMMENTARY
DOUG PORTER, CHIEF ECONOMIST, BMO CAPITAL MARKETS
“It was a very interesting month of course. There were a lot of moving parts, most notably the end-of-month cut in the GST and in some provinces the HST. Despite all the complications I would say that this month landed pretty close to expectations.”
“I think what’s important here though is looking through the GST holiday is that the core measures did moderate somewhat in the month, at least the Bank of Canada’s two main core measures.”
“The economic uncertainty we’re facing and the fact that inflation continues to moderate does leave the door wide open for the bank (Bank of Canada) to trim again.”
DEREK HOLT, VICE PRESIDENT OF CAPITAL MARKETS ECONOMICS AT SCOTIABANK
“The core inflation pressures at the margin are still signaling that underlying inflation is putting upward pressure upon the Bank of Canada’s 2% target.”
“They (BoC) might take the easy route and just give markets what they’ve priced, which is a quarter point cut. But I don’t think they should. I think when we have ripping job growth in Canada… when we have their core measures of inflation still warm at the margin, we’re tracking decent growth for the fourth quarter of the year and a pickup in consumption… What is the rush to have to cut especially when tariffs and retaliation pose uncertain effects on what happens to inflation going forward.”
ANDREW GRANTHAM, SENIOR ECONOMIST, CIBC (TSX:CM) CAPITAL MARKETS
“Overall, there are a lot of moving pieces and temporary factors playing out in the inflation data at the moment. But through the volatility underlying price pressures appear to be close to 2% and we continue to expect a 25 bp (basis point) reduction in interest rates from the Bank of Canada next week.”
