Canadian inflation shows continued signs of reversal

The annual rate of inflation in Canada slowed to 6.3 per cent in December.

The rate peaked in the summer at 8.1 per cent and has been slowly decelerating since then. In November, the annual inflation rate was 6.8 per cent.

Helping reduce the inflation rate is the fact that gas prices have eased compared to much of last year. Grocery costs are still rising but at a slightly lower rate.

Statistics Canada reported that Canadians were still paying 11 per cent more on an annual basis for groceries in December, though that is a slight improvement from 11.4 per cent in November.

At the gas pump, Canadians paid 13.1 per cent less in December compared with November. The federal agency said the price of crude oil dropped as concerns of a slowing global economy grew.

If both grocery and gas are excluded, prices rose 5.3 per cent in December on an annual basis.

These findings are key to The Bank of Canada. It will be paying close attention to the latest inflation report as it ponders its next interest rate decision, set for Jan. 25.

Jeff Schuster, president of global forecasting at LMC Automotive, recently explained that slowing inflation would have an impact on how the central bank approaches an interest rate increase.

“But that could be some signalling that maybe we’re starting to get to the end of the significant increases,” he told attendees of TalkAuto, hosted by Canadian Black Book in November in Woodbridge, Ontario.