It is difficult to put a lid on inflation. Canada's consumer price index decreased to 6.8 per cent in November from 6.9 per cent in the previous two months.
The reading was higher than expected.
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The pace of price pressures perked up in November with a rise of 11.4 per cent. The core prices, which exclude food and energy, rose from the previous month's pace.
Everyone is watching the data.
Even with the slight upside surprise today, the October and November prints left inflation running below the Bank of Canada's October forecast.
It would be nice to see some signs of inflation coming in between now and the next meeting of the Bank in January because we still see the Bank pausing its hiking cycle and leaving rates on hold.
The trimmed mean and median measures both accelerated as well. The three-month annualized rate of the trimmed mean metric went up to 3.8 percent from 3.5 percent. Three-month rates can be very volatile. The Bank of Canada explicitly stated that it wanted to see those metrics fall further before declaring that material progress towards the inflation target had been made.
Important data points will be released before the next Bank of Canada rate decision. The central bank will hit the pause button in January, but will be keeping a close eye on incoming data.
Almost 80 per cent of the components of the consumer price index are rising at more than three a year, and more than 60 per cent are rising at more than five a year. In November, the share of components rising by more than five per cent increased slightly. Measures of core inflation went up in November.
Inflation is well above the BoC's target of two per cent and inflation expectations are rising. The Bank of Canada was hoping for a decline in underlying inflationary pressures and this report is likely to be disappointing. The BoC is expected to increase its policy rate by 25basis points at the January meeting. The decision will be dependent on the next employment report and the next inflation report.
The disappointingly high reading is due to the fact that November is usually a weak month for prices. Lower gasoline prices made a difference.
The process of turning the temperature down on inflation is taking a long time and we think it may be a theme for next year. While lower pump prices will help chop next month's rate, the fact that many measures of core inflation are nudging higher is a warning sign. We are leaning towards the view that the Bank of Canada hikes rates one more time in January to 4.5 per cent, and this report does nothing to dispute that call. The possibility of even more rate hikes later on is something nobody is talking about.
The email address is shughes@postmedia.
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