Canada’s inflation rate stays put at 3.1% with notable easing in grocery prices

Canada’s annual inflation rate held steady at 3.1 per cent last month, as reported by Statistics Canada in its latest consumer price index released on Tuesday (Dec. 19). Despite expectations for a decline in inflation, efforts to control price growth faced setbacks, primarily attributed to increased prices in recreation and clothing.

Despite the overall stability, some positive signs emerged, with a slowdown observed in specific core inflation measures that exclude volatile components. 

“Today’s moderately disappointing result drives home the point that we still have an inflation fight on our hands, in case there was really any doubt,” BMO chief economist Douglas Porter said in a statement. “Still, the bigger picture remains intact: The underlying inflation trend is lower, the economy is chilly, and the Bank is expected to begin trimming rates around mid-year.”

Amidst these economic dynamics, there is encouraging news for the grocery sector. The report indicates a notable easing in the price increases for groceries, marking the fifth consecutive month of relief. Grocery prices were up 4.7 per cent from a year ago, showcasing a slowdown from October’s 5.4 per cent.

While some sectors experienced unchanged prices, including services where lower prices for cellphone services offset higher costs for travel tours, the grocery industry is navigating a more stable path.

Earlier this month, the Bank of Canada chose to maintain its key interest rate at five per cent for the third consecutive time, buoyed by the slowdown in inflation and the economy throughout the year. In a recent speech, Governor Tiff Macklem said there are potential challenges in returning inflation to the central bank’s two per cent target, recognizing possible bumps along the way.

Still, most analysts anticipate the likelihood of an interest rate cut in the coming year, according to BNN Bloomberg.