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Canada Inflation slowed more than forecast to 2 per cent on gas
Canada Inflation slowed more than forecast to 2 per cent on gas

Canada Inflation slowed more than forecast to 2 per cent on gas

A big drop in gasoline prices slowed Canada’s annual pace of inflation in November, reversing a spike the previous month and providing the Bank of Canada with plenty of reason to keep interest rates firmly in neutral.

The consumer price index rose 2.0 percent from a year ago following the October pace of 2.4 percent, Statistics Canada said today from Ottawa. The core rate, which excludes eight volatile products including fruit, vegetables and gasoline, slowed to 2.1 percent following the October pace of 2.3 percent, which was the fastest in almost three years.

Economists forecast the total rate would rise 2.2 percent and core by 2.4 percent, according to median responses in separate Bloomberg News surveys.

Bank of Canada Governor Stephen Poloz has said inflation will slow to a 1.4 percent pace in the second quarter of next year, ending a period of faster-than-expected gains linked to temporary factors such as a weaker currency and price increases for products such as meat. Policy makers have kept their benchmark overnight lending rate at 1 percent for more than four years and economists surveyed by Bloomberg predict Poloz won’t tighten for about another year.

The slower inflation “is about in line with what the bank was thinking,” Mark Chandler, head of fixed income research at RBC Capital Markets in Toronto, said in a telephone interview. That frees Poloz to focus more on other trends in the economy, such as whether lower oil prices will derail business investment, he said.

Agencies/Canadajournal




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