Canada: Inflation declines to lowest level since June 2023 in January
Inflation dropped to 2.9% in January, following December’s 3.4% and well below market expectations. January’s reading marked the lowest inflation rate since June 2023 and meant that inflation moved back within the Central Bank’s 1.0%–3.0% target range for the first time since June 2023. The result was largely driven by lower price pressures for food, transport and clothing more than offsetting brisker housing price inflation.
Annual average inflation fell to 3.6% in January (December: 3.9%). Meanwhile, core inflation edged down to 2.4% in January, from the previous month’s 2.6%.
Finally, consumer prices were flat in January over the previous month, following December’s 0.31% drop.
On the monetary policy implications, Goldman Sachs analysts said:
“Inflation surprised to the downside in January and the details of the report were also weak, so we view [the] print as a signal that inflationary pressures are cooling, consistent with our expectation that inflation will fall back to +2.1% by end-2024. Today’s data increase our confidence that the BoC cuts for the first time at an upcoming meeting, but we believe that the BoC will want to see more evidence of sustained easing in underlying inflation prior to any pivot (especially given slower progress in forward-looking inflation indicators like inflation expectations and wage growth).”