Inflation rate in Canada falls to 6.3% as CPI growth cools

Statistics Canada reported that annual inflation across the country slowed for the sixth consecutive month in December

Statistics Canada reported that Canada’s annual inflation rate fell to 6.3% in December as the consumer price index (CPI) growth continued to cool. This marks the sixth consecutive month of decline in the inflation rate, which reached a peak of 8.1% in June 2022.

The CPI measures the change in prices of a basket of goods and services purchased by Canadian households. The CPI increased by 0.6% between November and December 2022, which is a smaller increase than the 0.7% increase seen between October and November.

Food and gasoline prices remain major contributors to inflation

Food prices continued to be a major contributor to inflation, with an annual increase of 11% in December. Gasoline prices also remained elevated, although they have decreased slightly from their peak in June 2022.

However, there were some signs of moderation in inflation in other categories. For example, the price of durable goods, such as furniture and appliances, increased by only 1.7% in December compared to 2.3% in November.

Core inflation rate remains elevated

The core inflation rate, which excludes food and energy prices, remained elevated at 5.3% in December. This suggests that inflationary pressures are still present in the Canadian economy, even as the overall inflation rate declines.

The Bank of Canada has been raising interest rates in an effort to bring inflation back to its target of 2%. The central bank has raised its target overnight rate from 0.25% in March 2022 to 4.25% in January 2023.

Economists expect inflation to continue to decline in 2023

Economists expect inflation to continue to decline in 2023. However, they also caution that inflationary pressures could persist due to factors such as the ongoing war in Ukraine and supply chain disruptions.

The Bank of Canada has indicated that it will continue to raise interest rates if necessary to bring inflation back to its target.