Written by Miguel Fernandez Morales | Published on January 24, 2025
Statistics Canada said Tuesday the annual inflation reading for December came in at 1.8 per cent, down from 1.9 per cent in November. The report noted restaurant food purchases and alcohol bought from stores contributed the most to the deceleration.
Without the tax break, the agency said the annual inflation rate would have risen to 2.3 per cent, driven in part by upward pressure from a month-over-month jump in accommodation costs in British Columbia.
"Looking beyond the tax cut, it was not a great report, frankly, from the inflation standpoint," BMO chief economist Doug Porter said.
Growth in grocery prices also decelerated from November to 1.9 per cent year-over-year, from 2.6 per cent. Gas prices rose 3.5 per cent year-over-year. Shelter cost inflation ticked down slightly in December to 4.5 per cent, while rent prices rose at a slower pace year-over-year in December, at 7.1 per cent.
Attention now turns to the Bank of Canada, which is set to make an interest rate decision. Many economists have called for another quarter-percentage point rate cut, following a half-point cut in December.
Porter said weighing on the central bank's decision will be the threat of 25 per cent tariffs from U.S. President Donald Trump. "It's almost like we need two forecasts: one with tariffs and one without," Porter said.
"In the mild scenario where Canada is affected by modest or no tariffs from the U.S., we were assuming three rate cuts through the rest of the year, taking the overnight rate down to 2.5 per cent. I think we have to revisit the entire forecast if we are indeed subject to 25 per cent tariffs."
Contact me at 647-985-0348 or miguel@yourfamilyrealtor.ca