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Special Report

Canada Inflation Research Brief

December 2023

Annual Inflation Hovers Just Above Target Range,
While Easing Takes a Temporary Pause

Inflation unchanged from previous month. Annual price growth hit 3.1 per cent in November, matching October’s reading. The Bank of Canada’s preferred measures of core inflation — CPI-trim and CPI-median — also held stable at 3.5 and 3.4 per cent, respectively. This unchanged reading was partially fueled by a 10 per cent monthly jump in travel tour prices, which alone pushed up the CPI by 0.2 per cent monthly. However, this pause in easing inflation is likely to be temporary, as historically large monthly moves in travel-related costs are swiftly reversed. Inflationary pressures are likely to ease further over the coming months. Excess demand in the economy is largely gone, with GDP contracting and consumption re-balancing in the third quarter. Canada’s unemployment rate has also increased 80 basis points year-to-date as of November, suggesting wage growth is primed to cool. As a result, it is still likely that the BoC’s next move will be an interest rate cut.

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