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Inflation Moves Higher in December

Jan 18, 2019

The Conference Board of Canada’s Principal Economist Alicia Macdonald offers the following insights on the Consumer Price Index data for December:


“Total inflation pushed higher in December while core inflation held steady at just below the Bank of Canada’s 2.0 per cent target. With inflation almost at target and economic growth this year forecast to be strong enough to support a reduction in monetary stimulus, we expect the Bank of Canada will continue to gradually lift interest rates.” 
—Alicia Macdonald, Principal Economist, The Conference Board of Canada


  • After decelerating to a 1.7 per cent pace in November, inflation moved higher in December, coming in at 2.0 per cent. Excluding the effect of gasoline prices, inflation was 2.5 per cent—up from 1.9 per cent in November and the strongest growth in that reading since October 2014.
  • The average of the Bank of Canada’s three core inflation measures held steady at 1.9 per cent this month. CPI-median grew at 1.8 per cent while the other two measures increased by 1.9 per cent in December.
  • Earlier this month, the Bank of Canada flagged the persistence of the housing market adjustment as something that it would be watching closely over the next few months. Today’s data showed that mortgage interest costs are up 7.5 per cent from last year—the fastest growth since September 2008.
  • With mortgage interest costs increasing at such a fast pace, consumers are devoting more of their disposable income to debt servicing costs and will be unable to increase their spending at the same pace observed over recent years.
  • Our latest Canadian Outlook, accounts for a slowdown in consumer spending on goods, services and housing due to higher debt servicing costs but still suggests the economy will be strong enough to warrant a reduction in monetary stimulus. With economic growth strong and core inflation almost at the Bank’s target, we continue to expect the Bank of Canada to increase its policy rate twice this year.

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