StatsCan reported this morning that headline CPI rose 2.2 percent year-over-year in November, up from a 1.9 percent pace in each of the three preceding months. Gasoline prices were higher year-on-year in November for the first time since October 2018, and this was the key factor pushing the headline figure above the Bank of Canada's 2 percent target. Lower gasoline prices have in a sense masked the underlying trend in headline CPI for much of the past year: the all-items index excluding gasoline has been above 2 percent throughout this year. In November this aggregate was up 2.3 percent from a year ago, the same pace as in October.
The Bank of Canada's three preferred measures of core inflation also moved higher in the month. The average year-on-year increase in the three measures rose to just under 2.2 percent from 2.1 percent in October. One of the three core measures, CPI-median, now stands 2.4 percent higher than a year ago. This is the broadest of these three rather arcane measures, and the fact that it has moved further above target may start to be a matter of concern for the Bank.
There is nothing in the data to suggest that price pressures are getting out of hand. While the Bank will want to maintain the credibility of its targeting approach, it will also have to take account of the performance of the real economy as it contemplates its next policy move. In this regard, the shocking weakness in employment in November, as well as recently reported falls in retail and manufacturing sales, are likely to push the Bank toward easing some time in early 2020. As always, of course, the Bank's decisions will ultimately be data-dependent.
No comments:
Post a Comment