Canada's inflation rate went up in December, hitting 3.4% compared to the year before — in part due to gasoline prices. (Ted Dillon/CBC)
Canada's annual inflation rate surged to 3.4 percent in December, marking an increase from the 3.1 percent seen in both October and November compared to the previous year, according to data released by Statistics Canada on Tuesday.
The rise in December's inflation figure was attributed to increases in the prices of gasoline, air travel, passenger vehicles, rent, and food prices at stores, which went up by 4.7 percent year-over-year, mirroring the rate of increase in November. Chief economist Doug Porter from the Bank of Montreal noted that while this represents an improvement from the previous year, the inflation rate remains slightly higher than desired.
Porter highlighted potential reduced spending on discretionary items, such as travel tours, indicating some underlying softness in consumer spending. The inflation figure, excluding gasoline, showed a lower rate compared to November, and without this exclusion, the consumer price index for December would be even higher at 3.5 percent.
The inflation rate of 3.4 percent remains above the Bank of Canada's target of two percent. The central bank has raised interest rates 10 times since early 2022 to curb high inflation, and while a slowdown has led to a period of rate stability, economists speculate on the possibility of a rate cut in 2024. Despite the recent data pointing to potential interest rate cuts, it is noted that the Bank of Canada remains cautious, emphasizing the need for further progress on inflation elements before considering a rate reduction.
The latest inflation data follows a Bank of Canada survey revealing increased cutbacks in spending by Canadians, while mortgage-holders express confidence in managing higher payments amid loan renewals. Approximately two-thirds of Canadians, as indicated by the central bank's consumer expectations and business outlook surveys, reported reducing spending or planning to do so due to expectations related to interest rates and inflation.
