Another critical factor in today’s data is that inflation in services eased to 5.3% from 5.6%.
Food prices, however, remain elevated in January (+10.4%) compared to 10.1% in December. Grocery price acceleration in January was partly driven by year-over-year growth in meat prices (+7.3%), resulting from the most significant month-over-month increase since June 2004. Food purchased from restaurants also rose faster, rising 8.2% in January following a 7.7% increase in December.
Bottom Line
The Bank of Canada must feel pretty good about today’s inflation numbers. They confirm the wisdom of their announced pause in rate hikes at the January meeting. Despite continued strength in the labour market and January retail sales, headline and core inflation measures have declined again, with a five handle now on the headline rate. That is still a long way to the 3.0% inflation forecast by the end of this year, but it is moving in the right direction.
There will be no BoC action when they meet again on March 8. Their press release will be scrutinized for a hawkish versus dovish tone. Regardless of upcoming data, there is virtually no chance of any rate cuts this year.
By Dr Sherry Cooper |