We will see success on the inflation front in 2023, but it will be slow: Chief economist
Economists expect Canadian inflation cooled down in December.
Canada's consumer price index (CPI) for last month will be released on Tuesday by Statistics Canada. Economists tracked by Bloomberg expect that inflation rose 6.4 per cent on a year-over-year basis in December, a slight decline from the 6.8 per cent figure reported in November.
“Broader measures of inflation have shown signs of cooling off,” said Nathan Janzen, assistant chief economist at RBC Economics, in a report released Friday.
Janzen said December's decline is likely driven by a drop in gasoline prices, which fell 13 per cent on a month-over-month basis in December.
While food prices are expected to rise, Janzen noted that this trend should reverse in 2023 as global agricultural supply chain disruptions ease.
However, Janzen said it expects shelter costs to remain elevated due to the high-interest rate environment.
James Orlando, senior economist at TD Economics, said he thinks elevated housing costs will keep core inflation, which strips out food and energy prices, relatively high.
According to StatsCan, core inflation rose 5.4 per cent on a yearly basis in November.
POSSIBLE RISE IN CORE INFLATION
BMO economists are calling for a possible rise in December core inflation.
“The more traditional core inflation metric, ex. food and energy, looks to hold steady at 5.4 per cent year-over-year, with some upside risk,” Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO Capital Markets, wrote in a report to clients on Monday.
Against the backdrop of persistent inflation and a strong labour market, Reitzes thinks the Bank of Canada will continue to hike interest rates.
BMO’s economics team expects the Bank of Canada to raise rates by 0.25 per cent when the central bank announces its next rate decision on Jan. 25.
The Canadian central bank is set to release its next interest rate decision on Jan. 25.