Canada Inflation Research Brief

Largest monthly drop in inflation since pandemic. Canada’s consumer price index decreased 0.6 per cent month-over-month in December, reaching 6.3 per cent annually. This decline beat the general consensus and was mainly caused by the 13 per cent month-over-month drop in gasoline prices. Nonetheless, the Bank of Canada’s primary measures for core inflation — CPI-trim and CPI-median — both edged down, causing them to reach 5.3 per cent and 5.0 per cent, respectively. Furthermore, the three-month annualized rate of these core measures, a key indicator for the central bank, now sits at 3.0 per cent, which is within the BoC’s target range. Annual price growth, as a result, is expected to ease further over the coming months as broad-based indicators continue to show promising signs of future price deceleration.