Pace of Price Growth Stable in November

Key Insights

In November, year-over-year price growth remained just above the Bank of Canada’s target range at 3.1 per cent. Mortgage interest costs and rent were two of the main contributors to year-over-year price growth. Gasoline prices have had a significant bearing on the direction of year-over-year inflation during the last several months. In November, the price of gas fell again, but by slightly less than in October. Year-over-year food price growth also decelerated for the tenth consecutive month though food prices were 5.0 per cent higher than they were last November.

As inflation cools, we expect that monetary policy will loosen in 2024. The key gauges that the Bank of Canada is zeroing in on to inform its policy decisions aren’t signalling an all-clear but are mostly moving in the right direction. Governor Macklem has also said that inflation doesn’t need to fall precisely to 2 per cent before rate cuts are on the table. Bank officials believe that the supply and demand balance in the economy has evened out. Inflation expectations remain elevated but are inching down. Corporate pricing behaviour, too, isn’t back to normal but is normalizing. Most core inflation measures have flattened or are decelerating (even if at a glacially slow pace), though the stall in CPI-median and CPI-trim in November will be scrutinized closely by the Bank. The pace of wage growth, however, could present a challenge for bringing inflation back to target.

Even as inflation eases, the pace of price growth for some goods and services will likely remain above 2 per cent. Elevated price growth is afflicting a narrower range of consumer products. However, some services’ prices will likely continue to post high year-over-year increases, and this could add additional pressure to household budgets. Price growth for some essential consumer services (like rent and mortgage interest costs) remains high. (Shelter prices have taken the lead from food in terms of posting the highest year-over-year growth). After coping with elevated inflation for several years, consumers are likely more sensitive to pressures put on the cost of living. Accelerating price growth for essentials like shelter could contribute to keeping inflation expectations elevated. Ideally, while consumers won’t forget that prices at the grocery store are much higher than they were a few years ago, they will hopefully notice that those prices are not climbing as quickly as they were in 2022. Lower prices at the pump should also help to reinforce confidence in inflation’s decent, supporting the continued easing of inflation expectations.

For more details about our inflation forecast and inflation’s impact on the Canadian economy, please consult our Canadian Five-Year Outlook.