Canada’s Inflation Rate eased to 1.8% in December 2024, slightly down from 1.9% in November, falling just below market expectations. This marks the lowest rate of price growth since September 2024, as inflation remains within or below the Bank of Canada’s target midpoint of 2% for the fifth consecutive month. This steady decline has bolstered expectations of further interest rate cuts in the coming months, as the central bank continues to monitor the country’s economic conditions.

Key Factors Contributing to the Slowdown

Several factors contributed to the moderation in inflation, particularly in the food and shelter sectors. Food inflation slowed significantly to 0.6%, down from 2.8% in November. This was partly driven by a decline in food purchased from restaurants, which saw a 1.6% drop due to goods and services tax breaks. Similarly, shelter inflation moderated slightly to 4.5%, with rent and mortgage interest costs rising more slowly. Rent inflation fell from 7.7% to 7.2%, while mortgage interest costs rose 11.7%, the lowest increase since October 2022.

Transportation Costs See Notable Increase

In contrast, transportation costs saw a sharp acceleration, rising by 2.3%, up from 1.1% in November. This was driven by a significant jump in gasoline prices, which surged 3.5% compared to a decline of 0.5% the previous month. The rise in gasoline prices was influenced by base effects, contributing to the overall uptick in transportation inflation.

Read More: Canada Interest Rate

Monthly Price Changes and Outlook

On a monthly basis, Canadian consumer prices fell by 0.4% in December, indicating a slight reduction in overall costs. With inflation continuing to ease, there are growing expectations that the Bank of Canada may continue its trend of rate cuts to support economic growth. As inflationary pressures remain subdued, policymakers will closely monitor the evolving economic landscape in the year ahead.

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