Statistics Canada reported this morning that consumer prices rose 2.1 percent in the year to November, up sharply from a 1.4 percent year-on-year increase in October. This is the first time headline CPI has moved above the Bank of Canada's notional inflation target since January and only the second time it has done so since 2014. While StatsCan identifies fuel prices, up a hefty 19.6 percent, as the main culprit for the rise in inflation, there are plenty of signs that price pressures are becoming more broad based, with seven of the eight sub-components of CPI rising*.
Until this latest report, there had been some comfort for the Bank in the fact that its three slightly arcane core inflation measures were significantly below the 2 percent target. However, two of those indices have also now moved up to just below the target level.
Governor Poloz has stressed that the Bank's future rate decisions will be data-driven, and that the Bank is still inclined to proceed cautiously. Still, the fact that CPI is moving higher even though the exchange rate has been relatively stable makes it very likely that another rate hike will be forthcoming in January.
* The exception: clothing and footwear.
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