Inflation in Canada ticked up in December, the national statistical agency said Tuesday, dampening hopes of rapid interest rate cuts as core costs remained stubbornly high.
This sudden acceleration to 3.4 percent, said Statistics Canada, was largely the result of higher costs for gasoline as well as airfares, fuel oil, passenger vehicles and rent.
Food prices also rose in the month, while the costs of travel tours fell.
The uptick in inflation by 0.3 percentage points comes after a steady decline from a recent peak of 8.1 percent in June 2022.
Although the headline inflation figure was in line with forecasts, several core price measures used by the Bank of Canada in determining its key lending rate moved higher in December.
These refer to measures stripping out volatile food and energy prices.
“The stickiness in these core measures of inflation comes as a disappointment to Canadians hoping to see enough progress today to open the door to rate cuts,” Desjardins analyst Royce Mendes said in a research note.
Still, Mendes added he is sticking to his bet that the central bank will start lowering rates in April “to keep the economy from falling into a deeper recession” than is needed to balance the situation.
CIBC’s top economist Katherine Judge commented that the Bank of Canada “will need to see more progress (on core inflation) before considering rate cuts.”
The central bank in December maintained its benchmark rate at five percent — its highest level in 22 years — and said it was “still concerned about risks” to the outlook for prices down the road.
The bank, which is aiming for inflation of one to three percent, is scheduled to make its next rate announcement on January 24.
