Canada Inflation Research Brief

Inflation returns to target range. Canada’s annual inflation hit 2.9 per cent in January, down from a 3.4 per cent measure in December and below market expectations of a 3.3 per cent reading. This deceleration was largely due to lower energy prices, which fell 2.7 per cent. With the most volatile components of CPI stripped out, the Bank of Canada’s preferred measure of core inflation — CPI-trim and CPI-median — also slowed, as clothing and recreation prices dropped. CPI-trim decelerated to 3.4 per cent from 3.7 per cent, while CPI-median eased to 3.3 per cent from 3.5 per cent. Overall, January’s inflation print was a positive shift in the right direction for commercial real estate investors, but the Bank of Canada will need to see this trend continue as a healthy labour market and still-elevated core measures provide further inflationary risks. Despite this, the BoC is still expected to lower the overnight rate by mid-2024.