Canada’s inflation rate fell to 1.9% in November

10:30 a.m.

What’s next?

– Matt Lundy

There’s a lot coming before the next Bank of Canada interest-rate announcement on Jan. 29.

First, there’s a slew of economic data, including another inflation report, and the Labour Force Survey.

But perhaps the biggest date on the macroeconomic calendar is Jan. 20, the inauguration of Donald Trump as U.S. president. Mr. Trump has vowed to bring in 25-per-cent tariffs on Canadian imports once in office, and Canadian policymakers are likely to retaliate in some way.

If there are retaliatory tariffs, “that means imports from the United States to Canada would become more expensive,” Bank of Canada Governor Tiff Macklem told The Globe last week in an interview.

“Certainly our hope is there are no new tariffs, but if there are concrete measures moving forward, yes, that is something we would take on board and we’ll have to work through what the response of monetary policy would be,” he added.

Investors are thinking the Bank of Canada’s next policy rate announcement will amount to a coin-toss, with the possibility that the central bank stands pat after lowering interest rates on five consecutive occasions. However, there are six weeks before the next rate decision, so expectations could shift.

10 a.m.

Inflation report shores up BoC’s approach to cutting cycle

– Mark Rendell

The Bank of Canada has been reluctant to formally declare that its fight with inflation is over. However, another month of below-target inflation suggests that prices are mostly under control and the central bank has been right to cut interest rates aggressively since the summer.

Annual Consumer Price Index inflation fell to 1.9 per cent in November, down from 2 per cent the month before. This is the second time in three months that headline inflation has come in below the central bank’s target, and the BoC is expecting a further drop in the coming months as the federal GST holiday temporarily lowers prices.

After cutting interest rates five times since June, including back-to-back half-point cuts in October and last week, the Bank of Canada is entering a slower phase of its easing cycle. Governor Tiff Macklem said last week that he would take a more “gradual” approach going forward, and suggested that further big rate cuts are off the table.

The latest inflation numbers do little to change this narrative. Financial markets hardly moved after the data were released. Interest rate swap markets put the odds of another quarter-point rate cut in January at 55 per cent, the same as before the Statscan release, according to LSEG data. Investors see two cuts, in total, next year, bringing the policy rate to 2.75 per cent by the summer and holding steady to the end of the year.

At 3.25 per cent, the policy rate is now at the top end of the “neutral” range – an estimate for where the benchmark rate should settle when inflation is on target and the economy is growing at its full potential. The bank believes the neutral rate is somewhere between 2.25 per cent and 3.25 per cent.

With headline inflation expected to fluctuate in the coming months, Mr. Macklem has said the bank will be focusing on core measures of inflation. Here, there are still some signs of pressure. The bank’s two preferred measures of underlying inflation remained elevated at 2.6 per cent and 2.7 per cent, the same as in October. The story, however, is more complicated under the hood.

“Both core-median and trimmed mean rose 0.3 per cent, which pushed the average of the three-month annualized rates up to 3.3 per cent from an upwardly revised 2.9 per cent in October,” Royce Mendes, head of macro strategy at Desjardins, wrote in a note to clients.

“That said, the increase in those measures partially reflects the inclusion of mortgage-interest costs in the calculation in November, a category which had previously been excluded. Given that mortgage-interest cost inflation has decelerated and will likely continue to do so now that the Bank of Canada has conducted a number of rate cuts, central bankers might want to look through that strength in their preferred measures.”

The path of interest rates in the coming months could be determined by what happens with the threatened U.S. tariffs on Canadian goods, which Mr. Macklem has called “a major new uncertainty.”

In an interview with The Globe and Mail last week, Mr. Macklem said that any monetary policy response would depend on the size of the tariffs, what products they applied to and whether there was retaliation from Canada.

“It is a complicated shock for monetary policy, because it’s what we call a negative supply shock. It’s going to hurt GDP growth. And particularly if there are retaliatory tariffs, that means imports from the United States to Canada would become more expensive,” Mr. Macklem said.

“To some extent, it’s going to depend on the magnitude. A 25-per-cent across-the-board tariff is very big. And even if something is theoretically a level effect, if it’s a very big level effect, you can’t look through it.”

9:52 a.m.

Economists react to the November inflation report

– Darcy Keith

Here’s how some economists reacted to today’s report:

Douglas Porter, chief economist, BMO Capital Markets

While the Bank of Canada will welcome the renewed dip below 2% for headline inflation, they would prefer that the sticky core trends stayed away this holiday season. Note that the Bank’s October MPR forecast for core inflation was an average of 2.3% for Q4 — instead, it’s tracking at 2.65%, a notable miss. The deepening sag in the Canadian dollar is not going to help. In a nutshell, this report reinforces the point that the Bank will now turn to a more gradual path for rate cuts as we head into 2025. While we expect a further trim on January 29, another meaty set of core readings next month will prompt some chattering about a pause, especially with the Fed seemingly headed that way in January and the loonie on the ropes.

Thomas Ryan, North America economist, Capital Economics

The Bank will probably choose to look through the decline in headline inflation, given it was supported by temporary factors. It cannot do the same, however, for the second consecutive strong 0.3% m/m gains the CPI-trim and CPI-median measures …. The 3-month annualised rate for the average of the two is now at 3.3%, above the upper limit of the Bank’s 1% to 3% target range. We do not think this is enough for the Bank to call time on its easing cycle but, paired with the recent pick-up in some of the activity data, it confirms that the Bank will start moving in smaller 25bp increments and raises the chance of a pause at the meeting next month.

Royce Mendes, managing director and head of macro strategy, Desjardins

Given the seasonal element in those price declines, the Bank of Canada would typically look to its preferred core measures of inflation to guide upcoming monetary policy decisions. However, these measures provided conflicting signals in November. Both core-median and trimmed mean rose 0.3%, which pushed the average of the three-month annualized rates up to 3.3% from an upwardly revised 2.9% in October. That said, the increase in those measures partially reflects the inclusion of mortgage-interest costs in the calculation in November, a category which had previously been excluded. Given that mortgage-interest cost inflation has decelerated and will likely continue to do so now that the Bank of Canada has conducted a number of rate cuts, central bankers might want to look through that strength in their preferred measures…. We continue to expect that the central bank will cut rates another 25 basis points in January, but we anticipate a pause in March. Our mid-year and end of year forecasts of 2.75% and 2.25% remain unchanged for 2025, given that the disinflationary pressures from mortgage renewals and slower population growth are likely to weigh on prices next year.

Read more market and economist reaction from today’s inflation report.

9:43 a.m.

Here’s a list of November inflation rates for selected Canadian cities

– The Canadian Press

Canada’s annual inflation rate was 1.9 per cent in November, Statistics Canada says. The agency also released rates for major cities, but cautioned that figures may have fluctuated widely because they are based on small statistical samples (previous month in brackets):

• St. John’s, N.L.: 1.1 per cent (1.3)
• Charlottetown-Summerside: 2.1 per cent (1.7)
• Halifax: 2.1 per cent (1.8)
• Saint John, N.B.: 1.8 per cent (1.8)
• Quebec City: 1.4 per cent (1.4)
• Montreal: 1.9 per cent (2.0)
• Ottawa: 1.9 per cent (2.1)
• Toronto: 2.3 per cent (2.3)
• Thunder Bay, Ont.: 2.2 per cent (2.1)
• Winnipeg: 1.2 per cent (1.3)
• Regina: 2.1 per cent (2.0)
• Saskatoon: 1.8 per cent (1.7)
• Edmonton: 2.7 per cent (2.9)
• Calgary: 3.0 per cent (3.3)
• Vancouver: 2.3 per cent (2.2)
• Victoria: 2.1 per cent (2.0)
• Whitehorse: 2.0 per cent (2.2)
• Yellowknife: 1.8 per cent (2.4)
• Iqaluit: 1.4 per cent (1.5)

9:40 a.m.

Here’s a list of November inflation rates for Canadian provinces

– The Canadian Press

Canada’s annual inflation rate was 1.9 per cent in November, Statistics Canada says. Here’s what happened in the provinces (previous month in brackets):

• Newfoundland and Labrador: 1.2 per cent (1.1)
• Prince Edward Island: 1.8 per cent (1.3)
• Nova Scotia: 1.7 per cent (1.5)
• New Brunswick: 2.0 per cent (1.8)
• Quebec: 1.5 per cent (1.6)
• Ontario: 1.8 per cent (2.0)
• Manitoba: 0.9 per cent (1.1)
• Saskatchewan: 1.6 per cent (1.6)
• Alberta: 2.8 per cent (3.0)
• British Columbia: 2.3 per cent (2.4)

9:35 a.m.

Despite today’s inflation report, rent growth is on a downward trend

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– Erica Alini

Despite what’s likely a hiccup in today’s report, rents promise to be one of the few unquestionably good-news inflation stories heading into 2025. Rent growth is on a downward trend and likely to continue to slow for the foreseeable future.

Rents across Canada were 7.7 per cent higher in November compared with the same month last year, Statistics Canada report. That was up from a 7.3-per-cent annual increase in October, but still significantly lower than the 8.9 per cent peak recorded in May and then again in August of this year.

Inflation rarely comes down in a smooth slide, and another set of rent data suggests today’s moderate upward swing is likely a short-lived bump in the downward-sloping road.

When Statscan measures rent inflation it looks at rents paid by new tenants, those renewing a lease for a unit they already live in, and those who are in the middle of their lease. The data provides a measure of the price pressures faced by the entire pool of renters.

But looking at what landlords are asking for available rentals is a better gauge of whether the rental market is cooling or heating up. And asking rents on average have been falling.

When averaged across the country, rents advertised online fell for the first time in three years in October and declined again in November, in year-over-year terms, according to the latest data from rental platform Rental.ca and housing analytics company Urbanation.

The average of rents advertised for all residential properties posted on Rentals.ca was $2,139 last month, down 1.6 per cent compared with the same month in 2023, with large declines recorded in both Toronto and Vancouver - among the country’s priciest rental markets.

Granted, the national average masks a variety of trends in different regions of the country. Rents are still seeing strong growth in places such as Alberta (up 3.7 per cent annually), New Brunswick (up 5.1 per cent annually), and Manitoba (up 7.9 per cent annually). And they continue to skyrocket in Saskatchewan (up 12.1 per cent annually), one of the country’s most affordable rental markets.

But slower immigration, an increasing supply of new rental buildings, and rising unemployment – with a labour market that is especially challenging for young people, who are more likely to be renters – are adding downward pressure on rents, RBC economist Rachel Battaglia wrote in a recent report.

It’s a bright spot in what could be like a muddled inflation picture for consumers over the next few months, especially for those who can’t afford to spend much on travel, clothing, furniture and other discretionary items, which have been seeing some price declines.

While inflation overall is now under control, the prices of groceries are once again climbing at a healthy clip (2.6 per cent annually in November). And a weak loonie is clouding the outlook for both food and gasoline inflation, as Canada imports a lot of both using U.S. dollars.

And the housing market promises to be, at best, a mixed bag. On the one hand, falling interest rates are benefitting anyone getting or renewing a mortgage. On the other hand, cheaper borrowing is already reigniting demand and pushing up home prices, a trend that threatens to cancel affordability gains for homebuyers.

Lower rents – at least in some markets – may just be what provides many Canadians with a real break from relentlessly higher living costs for the next little while.

9:20 a.m.

Inflation highlights: Canadians see grocery prices ease, rental costs rise in November

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– Matt Lundy

Here are some highlights from Tuesday’s report:

• Core inflation is showing some mixed signals. On a three-month annualized basis, the Bank of Canada’s preferred measures of core inflation – which strip out volatile movements in consumer prices – rose by 3.2 per cent and 3.3 per cent, respectively. Two months ago, those measures were rising by 2.1 per cent.
• On the other hand, the short-term trend for other measures of core inflation is more encouraging. On a three-month annualized basis, the CPI excluding food and energy rose by 1.9 per cent in November, matching the increase in October.
• Rents are moving in the wrong direction. Year-over-year, rental costs jumped by 7.7 per cent in November, up from a 7.3-per-cent pace in October. However, there is ample data out of the private sector that shows asking rents are on the decline in many urban areas.
• Grocery prices rose 2.6 per cent, year-over-year, in November, a slight deceleration from 2.7 per cent in October. While food price increases have moderated, grocery costs have risen by 20 per cent over three years.

9:15 a.m.

Opinion: As the inflation rate normalizes, why don’t people feel better about their finances?

– Rob Carrick

We’re fast getting to a point where inflation will return to being the routine financial statistic it was five years ago. The 1.9-per-cent rise in the cost of living last month is a yawner in an overall sense, though food and shelter came in above that level.

The obvious question to ask as the inflation rate normalizes is why people don’t feel better about their finances. As a financial journalist, I’m pitched stories on a weekly basis at least about polls showing how worried people are about paying for living costs and debts.

The job market isn’t in great shape these days, but average hourly wage increases hit 4.1 per cent in November on a year-over-year basis. That’s double the inflation rate. Meantime, the housing market seems to be revving up, and stocks are flying. Statistics Canada says household net worth gained 1.7 per cent in the second quarter of this year, compared with 0.4 per cent in the previous quarter.

What’s missing is a sense of optimism about the future. The past – the pandemic years – was terrible, and our present state of mind reflects that to a large extent. Looking ahead, there is little reason to feel like your finances will be more solid.

The federal government attempted to address this malaise with promises of a two-month HST holiday and $250 payments for working people. But the departure of finance minister Chrystia Freeland from the federal cabinet on Monday blew up whatever benefits there might have been from these initiatives. Ms. Freeland questioned the use of “costly political gimmicks” at a time when the government may need financial room to handle a trade war with the United States.

What Canadians badly need is strong leadership from the federal government – a sense that it recognizes the financial pain some people are feeling and has a fiscally sensible plan to make things better. Inflation, possibly the biggest financial irritant of all, has been brought under control. That’s something to build on.

9:05 a.m.

The new inflation numbers

– Matt Lundy

Canada’s annual inflation rate hit 1.9 per cent in November, Statistics Canada said Tuesday in a report, edging down from 2 per cent in October. The results came in slightly lower than financial analysts’ expectations of 2 per cent.

This marks the fourth consecutive month in which inflation – as measured by the annual change in the Consumer Price Index (CPI) – has matched or been lower than the Bank of Canada’s 2-per-cent target.

On a monthly basis, the CPI was unchanged in November from October. Adjusted for seasonality, consumer prices rose 0.1 per cent over the month.

Statscan said that slower price growth was broad-based in nature, pointing to shifts in the pricing of travel tours and mortgage interest costs facing homeowners.

On the latter, mortgage interest costs were up 13.2 per cent, year-over-year, but this pales next to increases of roughly 30 per cent that were seen last year. The Bank of Canada has cut its key policy rate on five consecutive occasions since the summer, which is easing pressure on debtors.

The statistical agency noted that Black Friday sales “partially contributed to lower prices across several major components, and were particularly notable in the household operations, furnishings and equipment,” along with clothing and footwear.

Tuesday’s report noted that hotel prices jumped 11 per cent in Ontario on a monthly basis. The report said this was the “swiftest monthly increase ever recorded for the month of November, coinciding with a series of high-profile concerts,” a nod to Taylor Swift’s six sold-out concerts in Toronto last month.

The CPI numbers will likely look more volatile in the near future, because of the federal tax holiday that went into effect on Dec. 14. The annual inflation rate could temporarily ebb to 1.5 per cent in January, Bank of Canada Governor Tiff Macklem said last week.

9 a.m.

How markets are reacting to today’s inflation report

– Darcy Keith

Markets barely budged on this latest inflation reading, with the Canadian dollar still hovering just above the 70-cent US mark. The Canadian dollar did slip to below 69.94 US cents earlier this morning, but the 70-cent US level is proving to be pretty impressive support, with three tests to below that level quickly becoming unraveled.

Canada’s two-year bond yield is up nearly two basis points to 3.046 per cent, well within its range of the morning, and in sync with its U.S. counterpart. (A basis point is 1/100th of a percentage point.)

Implied probabilities of future rate moves in swap markets haven’t changed either in the wake of the inflation report. They suggest 54 per cent odds of a quarter-point cut at the Jan. 29 Bank of Canada policy meeting, and about 46 per cent odds of no rate move at all. Markets are currently only pricing in a total of 50 basis points of more cuts through the course of next year.

Tuesday’s data was the first of two inflation reports that the Bank of Canada will get to assess before the bank’s next rate decision, so it’s not too surprising to see such little reaction in markets - especially given the drama unfolding in Ottawa.

Read more on how market bets and economist views for future BoC rate moves have shifted after today’s inflation data.

8:30 a.m.

Canada’s inflation rate fell to 1.9% in November

– Matt Lundy

Canada’s annual inflation rate hit 1.9 per cent in November, Statistics Canada said Tuesday in a report, edging down from 2 per cent in October. The results came in slightly lower than financial analysts’ expectations of 2 per cent.

7:40 a.m.

Bank of Canada to assess inflation target in coming mandate review

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– Mark Rendell

The Bank of Canada will be assessing whether 2 per cent is the best target for inflation in a mandate review that begins next year, Governor Tiff Macklem said Monday.

Every five years, the central bank and the federal government agree to a set of goals for monetary policy, which the bank then pursues independently. Most important is the target for inflation, which the bank attempts to hit by adjusting interest rates.

In a speech to the Greater Vancouver Board of Trade, Mr. Macklem said the central bank will use the upcoming mandate renewal process, which starts next year and runs until 2026, to address several crucial questions.

‘We need a richer playbook’: Tiff Macklem on kicking inflation, tariffs and uncertainty ahead

“In a more volatile world, how do we identify and measure underlying inflation? Is 2 per cent still the best target for the future? What’s the interaction between housing affordability and monetary policy?” Mr. Macklem said.

The central bank has looked at whether 2 per cent is the right target several times before, including in its mandate renewals in 2011 and 2016. Each time it concluded the stability and flexibility provided by the 2-per-cent target outweighed any potential benefits of a lower or higher target.

Read more on how Bank of Canada will assess the inflation target.

7 a.m.

November inflation report to be released today

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– Matt Lundy

Canada’s inflation numbers were likely subdued in November, remaining close to the Bank of Canada’s target.

Financial analysts expect that the annual inflation rate held steady at 2 per cent last month, matching the result in October. Statistics Canada will publish its Consumer Price Index report on Tuesday morning.

If those predictions prove correct, inflation will have been at or below the central bank’s 2-per-cent target for four consecutive months. The annual rate has been lower than 3 per cent for all of 2024, a sign of restored price stability across Canada.

The numbers are likely to look more volatile in the months ahead because of a two-month federal tax break on some goods and services that went into effect on the weekend.

Last week, Bank of Canada Governor Tiff Macklem said the tax holiday would temporarily lower inflation to around 1.5 per cent in January, but that the effects would be unwound after the measure expires in mid-February.

The central bank, which cut its key interest rate last Wednesday by half a percentage point, expects inflation to average roughly 2 per cent over the next two years.

The Bank of Canada has effectively declared victory over inflation, allowing it to cut interest rates at five consecutive meetings by a cumulative 1.75 percentage points. The benchmark interest rate now sits at 3.25 per cent.

But the timing of further cuts is hardly certain. In his opening remarks at last week’s announcement, Mr. Macklem said that “we anticipate a more gradual approach to monetary policy if the economy evolves broadly as expected.”

He continued: “Our decisions will be guided by incoming information and our assessment of the implications for the inflation outlook.”

Analysts on Bay Street are expecting more cuts from the central bank, which makes its next announcement on Jan. 29. But the bulk of the work in this easing cycle appears to be done.

Investors were pricing in a roughly 75-per-cent chance that the BoC cuts its policy rate by a quarter-point at the next opportunity, according to Bloomberg data as of Monday. For recent decisions, cuts were considered a guarantee, and the only debate was over the magnitude of the reductions.