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Inflation Decelerates but Core Price Growth Remains Solid

Feb 23, 2018

The Conference Board of Canada’s Principal Economist Alicia Macdonald offers the following perspectives on the Consumer Price Inflation (CPI) for January 2018 and the retail sales for December 2017.


The start of 2018 was marked by a deceleration in overall price growth with year-over-year inflation slowing to 1.7 per cent in January from December’s 1.9 per cent pace. While overall price growth slowed, gains in core price measures remained firm, leaving the Bank of Canada on track to lift interest rates two more times this year.
—Alicia Macdonald, Principal Economist, The Conference Board of Canada.


  • After growing by 1.9 per cent in December, CPI slowed to a 1.7 per cent pace in January.
  • Measures of core price growth show inflation is very close to the Bank of Canada’s 2.0 per cent target. Growth matched last months pace in the trim measure (1.8 per cent) and the median measure (1.9 per cent) while the common measure accelerated 0.2 percentage points to reach 1.8 per cent. This was the fastest pace of growth in CPI-common since April 2012.
  • The convergence of core inflation measures towards the Bank’s target supports the view that the economy is operating at close to its capacity. However, recent data releases point to a softening of economic growth at the end of last year.
  • In December, retail sales dropped 0.8 per cent, wholesale sales declined 0.5 per cent and manufacturing sales fell 0.3 per cent. These disappointing numbers will likely result in economic growth coming in below the Bank of Canada’s projection for the fourth quarter of last year and the first quarter of this year.
  • Despite a softer-than-anticipated end to 2017, there are several factors that will continue to support economic growth this year as outlined in our latest Canadian Outlook. Sustained economic growth and firming core inflation support our view that the Bank of Canada will continue to tighten monetary policy with an additional two interest rate increases this year.