Canadian underlying inflation hit the highest in a decade in November, reinforcing a decision by policy makers this month to refrain from cutting interest rates despite concerns around slowing growth.

Inflation rose 2.2 per cent in November from a year earlier, compared with 1.9 per cent in October, on higher shelter and vehicle costs, Statistics Canada reported Wednesday. The annual reading matched economist expectations. On a monthly basis, the consumer price index fell 0.1 per cent, also matching forecasts.

Core inflation -- seen as a better measure of underlying price pressure than the headline figure -- increased 2.2 per cent, the highest reading since 2009, from 2.1 per cent in October.

Wednesday’s report bears out the view from the Bank of Canada, which said in its December rate statement that inflation would increase temporarily in the coming months, due to year over year movements in gasoline prices.

“Should gasoline prices remain stable, the headline inflation rate should also cool back down in the second quarter of next year, as the year-ago comparisons become a bit firmer,” Royce Mendes, an economist at Canadian Imperial Bank of Commerce, wrote in a note.

Canada’s currency rose on the report, appreciating 0.2 per cent to $1.3132 per U.S. dollar at 8:47 a.m. Toronto time.

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Key Insights

  • Canada’s CPI has grown at 1.9 per cent or more on an annual basis for nine straight months, backing the Bank of Canada’s stance to remain patient and leave rates unchanged
  • Mortgage interest costs, driven by new lending, and higher prices for passenger vehicles were the largest contributors to the 12-month change in prices; telephone and internet access services were the main downward contributors
  • Energy prices rose 1.5 per centon an annual basis in November, on a weak comparison from a year earlier when gasoline prices were dropping due to the global supply glut
  • Consumers paid 6.2 per cent more for fresh or frozen beef in November from a year earlier; the price gains follow disruptions to North American supply chains and strong international demand for Canadian beef

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  • Following the end of export bans on Canadians pork, consumers paid more on an annual basis for ham and bacon, fresh or frozen pork in November from the prior month
  • On a monthly basis, passenger vehicles, fresh fruit and vegetables were the main upward contributors, while travel tours and traveler accommodation weighed on the downside, as package deals to holiday destinations became cheaper
  • Goods inflation at 2.3 per cent is the highest since August 2018

--With assistance from Erik Hertzberg.