In November 2024, Canada’s annual inflation rate dropped to 1.9%, slightly lower than the previous month’s 2% and falling short of market expectations of 2%. This marks a continuation of a favorable inflation trend that aligns with the Bank of Canada’s projections, which expect CPI inflation to hover around the 2% mark in the foreseeable future. The stability of inflation reflects the ongoing efforts by the central bank to maintain price stability amid changing economic conditions.

Core Inflation Remains Stubborn

Despite the overall decline in inflation, the core inflation rate, as measured by the trimmed-mean CPI, remained unchanged at 2.7%. This was contrary to market expectations that core inflation would ease to 2.5%. The persistence of this higher core inflation suggests that while headline inflation is softening, underlying price pressures remain in certain areas of the economy. As a result, the Bank of Canada may face challenges in delivering significant rate cuts, as they seek to balance inflation control with efforts to stimulate economic growth.

Gas Prices and Transportation Costs

Gasoline prices, which had dropped sharply in previous months, fell by a more modest 0.5% in November, compared to a 4% decrease in October. The base effects from earlier price drops faded, leading to a slower reduction in gas prices. This, in turn, contributed to a noticeable increase in transportation costs, which surged by 1.1% in November, up from a mere 0.2% in October. The rising transportation costs reflect a shift in inflationary pressures from energy to other goods and services, signaling a more complex inflation environment.

Easing Inflation in Shelter and Food

Inflation in shelter costs also eased in November, falling to 4.6% from 4.8% in October. This was due to slower price growth for mortgages, which helped offset rising rent costs. Meanwhile, food inflation slowed to 2.8% from 3%, with grocery prices showing signs of stabilization. Overall, while inflation pressures persist in some sectors, the broader trend remains one of moderation, suggesting that Canada’s economy may be moving toward a more stable inflationary environment. The Canadian CPI was unchanged from the previous month, further indicating a period of relative price stability.